World Bank lowers growth outlook for sub-Saharan Africa
Downgrades after President Jacob Zuma’s shock reshuffle ‘a significant setback to business and investor confidence in SA’, says World Bank
Washington — The World Bank cut its growth projection for sub-Saharan Africa this year because of weak expansion in the region’s three biggest economies, with low investor confidence in SA an issue.
The region’s gross domestic product (GDP) will expand 2.6% in 2017, the bank said in its Africa Pulse report on Wednesday. That compares with a January projection of 2.9% and matches the International Monetary Fund’s prediction released this week.
"The region’s three largest economies — Angola, Nigeria, and SA — are projected to post only a modest growth following a sharp slowdown in 2016," it said. "Investment growth will recover only gradually amid tight foreign-exchange liquidity conditions in major oil exporters and low investor confidence in SA."
The economy of SA, which vies with Nigeria’s to be the region’s biggest, expanded 0.3% last year, the slowest pace since a 2009 recession, due to a slump in commodity prices, weak demand for the country’s exports and a continuation of the worst drought since records started more than a century ago. Nigeria suffered its first economic contraction in 25 years in 2016 due to a drop in oil exports and foreign-currency shortages that raised inflation to a decade high.
Growth this year would be "better than the 1.3% in 2016, the lowest in two decades, but we are not out of the woods yet", World Bank Africa chief economist Albert Zeufack said in Washington on Wednesday. "Africa is still growing at negative per-capita rates."
The bank cut SA’s GDP growth forecast for this year to 0.6% from 1.1% earlier, and raised Nigeria’s to 1.2% from 1%.
Pravin Gordhan’s removal as SA’s finance minister in a cabinet reshuffle prompted S&P Global Ratings and Fitch Ratings to cut its credit rating to sub-investment grade. Moody’s Investors Service put its assessment of the nation’s debt, which is two levels above junk, on review for a downgrade on April 3.
"The recent events represent a setback to business and investor confidence, and are likely to weigh down on the country’s prospects," the World Bank said.
The bank reduced its forecast for the region’s expansion in 2018 to 3.2% from 3.6% in January.
Among non-resource intensive countries, such as Ethiopia, Senegal, and Tanzania, growth is expected to remain generally solid this year, supported by domestic demand, it said.
The economy of Angola, Africa’s biggest oil producer, would probably expand 1.2% this year, the bank said, leaving its January forecast unchanged.