Sub-Saharan Africa’s growth will slow in 2015 to 4.0 percent from 4.5 percent in 2014, according to the World Bank’s projections released yesterday.
This downturn largely reflects the fall in the prices of oil and other commodities, according to Africa’s Pulse, a twice-yearly World Bank Group analysis of the issues shaping Africa’s economic prospects released at the start of the World Bank Groups 2015 Spring Meetings.
The 2015 forecast is below the 4.4 percent average annual growth rate of the past two decades and well short of Africa’s peak growth rates of 6.4 percent in 2002-08. Excluding South Africa, the average growth for the rest of Sub-Saharan Africa is forecast to be around 4.7 percent.
Despite strong headwinds and new challenges, Sub-Saharan Africa is still experiencing growth. And with challenges come opportunities, said Makhtar Diop, World Bank Vice President for Africa.
The end of the commodity super-cycle has provided a window of opportunity to push ahead with the next wave of structural reforms and make Africa’s growth more effective at reducing poverty.
African exports still dominated by primary commodities.
Sub-Saharan Africa is a net exporter of primary commodities. Oil is the most important commodity traded in the region, followed by gold and natural gas. Over 90 percent of the total exports of eight major oil-exporting countries come from the three biggest exports of each country, which represent nearly 30 percent of their GDP.
But the recent price declines are not confined to oil, and Africas Pulse reveals that the prices of other commodities are now more closely correlated both with oil prices and with one-another.
As a result, terms of trade are declining widely among most countries in the region. The 36 African countries with expected terms-of-trade deterioration are home to 80 percent of the population and 70 percent of the economic activity in the region.
Large fiscal deficits and inefficient government spending remain sources of vulnerability for many countries of the region.
“It is urgent that these countries strengthen their fiscal positions and fortify their resilience against external shocks,” said Punam Chuhan-Pole, a World Bank Lead Economist for Africa and co-author of Africas Pulse.