Trade tensions undermining African and global growth
The World Bank has lowered its 2019 growth forecast for South Africa to 0.8%, which is half of a percentage point below the bank’s April forecast of 1.3%. The downward revision is contained in the twentieth edition of the bank’s Africa’s Pulse publication, which has been published twice a year for the past ten years.
South Africa’s growth is expected to rise to only 1% in 2020, which is 0.7 of a percentage point lower than the bank’s April forecast, and to climb to only 1.3% in 2021, a 0.5 percentage point downward revision from April.
“These large downward revisions reflect the sharp slowdown in real gross domestic growth (GDP) in the first quarter of 2019, low investor sentiment, and persisting policy uncertainty, including whether a solution could be found for Eskom, fiscal slippages would be averted, and structural reforms would be undertaken,” the authors state.
South Africa’s weak performance, together with ongoing economic difficulties in the region’s two other largest economies of Nigeria and Angola, has also contributed to a lowering in the growth outlook for sub-Saharan Africa (SSA) as a whole.
The region is expected to expand by 2.6% in 2019, which is slightly above the 2.5% growth of 2018, but 0.2 percentage points lower than the bank’s April forecast of 2.8%.
Chief economist for Africa Albert Zeufack noted that 2019 would be the fourth consecutive year during which SSA experienced sub-3% growth, which was insufficient to spur poverty reduction and create employment.
Speaking to African journalists from Washington, DC, via a teleconference Zeufack said the downward revision in the growth outlook could be attributed to deepening global trade tensions, which were affecting all regions, the slow pace of domestic reforms designed to address debt and improve spending efficiency and climate shocks, such as those associated with Cyclone Idai, which ravaged parts of Mozambique, Zimbabwe and Malawi in March.
Nevertheless, he highlighted that four countries – Ethiopia, Rwanda, Ghana and Ivory Coast – would grow by faster than 7% in 2019, making them among the fastest growing economies globally. Six other economies were growing at above 6%.
Excluding Nigeria, South Africa and Angola, growth in the rest of the region is projected at 4% in 2019, 0.4 of a percentage point lower than the April forecast.
“In South Africa, a combination of power cuts, low business confidence, and political uncertainty prolonged the decline in investment and dampened consumption and export growth,” the publication states.
South Africa’s fiscal outlook had also worsened, with the bank stating that the country’s overall fiscal deficit is expected to increase significantly. “Weaker real GDP growth led to a sizable revenue shortfall, while financial support to Eskom caused spending overruns.”
The bank also downgraded South Africa in terms of the publication’s ‘growth-resilience taxonomy’, which categorises different groups of growth performers according to the speed and persistence of the rate of growth of their GDP. The index includes five classifications, namely: established, improved, stuck in the middle, slipping and falling behind.
South Africa was the only country downgraded from ‘slipping’ to ‘falling behind’ in the latest publication, joining a group of countries that includes Burundi, the Comoros, the Republic of Congo, Gabon, Lesotho, Sierra Leone, Eswatini and Zimbabwe.