Economic growth is set to slow in Sub-Saharan Africa to 3.7 percent this year from 4.6 percent in 2014, its weakest pace since 2009, mainly due to the drop in commodity prices, the World Bank has said in its latest Africa pulse report.
NAIROBI, KENYA (FILE) (REUTERS) – Growth is expected to slow in 2015 to 3.7 percent, reaching the lowest rate since 2009, according to new World Bank projections.
The region’s economy, which grew 4.6 percent last year, will strengthen only marginally in the next two years, according to the World Bank’s new Africa’s Pulse, a report of economic trends and the latest data on the continent released twice a year.
The report indicates that progress in reducing poverty in Sub-Saharan Africa has been occurring faster than previously thought. According to World Bank estimates poverty in Africa declined from 56 percent in 1990 to 43 percent in 2012.
At the same time, Africa’s population saw progress in all dimensions of well-being, particularly in maternal and child mortality and primary school enrolment, where the gender gap shrank.
Bottlenecks in supplying electricity in many African countries have contributed to the slow economic growth in 2015.
“The Pulse finds that with weaker global market conditions, underpinned by sharply lower commodity prices, as well as a slowdown of growth in China, and tightening global financing conditions, all these factors are weighing down on Sub Saharan Africa’s growth,” said Punam Chuhan Pole, the Africa’s pulse report author.
Overall, growth in the region is projected to pick up to 4.4 percent in 2016, and further strengthen to 4.8 percent in 2017.
Sharp drops in the price of oil and other commodities have brought on the recent weakness in growth. Other external factors such as China’s economic slowdown and tightening global financial conditions weigh on Africa’s economic performance.
Factors hampering growth vary among countries. In the region’s commodity exporters, especially oil-producers such as Angola, Equatorial Guinea, and Nigeria, as well as producers of minerals and metals such as Botswana and Mauritania, the drop in prices is negatively affecting growth.
In Ghana, South Africa, and Zambia, domestic factors such as electricity supply constraints are further stemming growth. In Burundi and South Sudan threats from political instability and social tensions are taking an economic and social toll.
Sub-Saharan Africa’s rich natural resources have made it a net exporter of fuel, minerals and metals, and agricultural commodities.
These commodities account for nearly three-fourths of the region’s goods exports. Robust supplies and lower global demand have accounted for the decline of commodity prices across the board. For instance, the drop in the prices of natural gas, iron ore, and coffee exceeded 25 percent since June 2014, according to the report.
“We are still exporting a lot of raw materials. So creating the value chain inside Africa, removing the non-tariff barrier, reducing the bureaucracy, will allow us to improve the value chain and increase value addition in Africa,” said Makhtar Diop, the Bank’s vice president for Africa.
The report said Ivory Coast, Ethiopia, Rwanda, Mozambique and Tanzania are still expected to grow robustly, posting 7 percent or more growth per year between this year and 2017.
The report recommends that more investment in new energy capacity, attention to drought and its effects on hydropower, reform of state-owned distribution companies, and renewed focus on encouraging private investment will help build resiliency in the continent’s power sector.