Sub-Saharan Africa’s largest economies, including South Africa, continued to act as a drag on the economic performance of the region in 2018, new analysis by the World Bank shows.
The nineteenth edition of the bank’s bi-annual ‘Africa’s Pulse’ publication indicates that growth across the territory decelerated from 2.5% in 2017 to only 2.3% in 2018. Economic growth, thus, remained below population growth for the fourth consecutive year.
The publication, released on Monday, forecast that regional growth would rebound modestly to 2.8% in 2019; once again falling short of the 3% growth level last attained in 2015.
The outlook also represented a 0.4% downward revision from the bank’s 3.2% October forecast.
South Africa’s growth outlook remained unchanged from October and is forecast to recover from 0.8% in 2018 to 1.3% in 2019, before rising to 1.7% and 1.8% in 2020 and 2021 respectively.
The region’s most industrialised economy expanded by 1.4% in 2017, but entered a period of recession in the first half of 2018, which it exited in the third quarter of the same year.
“This gradual pickup in growth reflects expectations that consumer spending will strengthen, spurred by low inflation, and long-delayed structural reforms will help revive investment, as business confidence rebounds,” the bank said.
South Africa’s manufacturing production was flat in the first quarter of 2019 and mining output contracted, amid power cuts imposed by Eskom.
Africa’s two other largest economies, Angola and Nigeria, were also performing below potential, with Angola contracting in 2018 and Nigeria recovering modestly to growth of 1.9%, from 0.7% in 2018.
Excluding Nigeria, South Africa, and Angola, growth in the rest of the region is projected to rise moderately, from 4.1% in 2018 to 4.4% in 2019 and to firm to 4.8% in 2020.
Nevertheless, the forecasts represent a 0.9 and 0.5 percentage point downward revision from the bank’s October projections.
“External and domestic risks to the regional growth outlook are tilted to the downside,” the bank warned.
“On the external front, the main downside risks are a sharper than expected growth slowdown in the US, the euro area, and China; a sudden decline in commodity prices; and the escalation of trade tensions between major economies. Domestic risks include weaker fiscal consolidation, greater frequency of extreme weather events, and heightened security issues.”
The publication also urges African policymakers to pay greater attention to digital transformation, which the bank says has the potential to raise yearly growth per capita by 1.5 percentage points and reduce the poverty headcount by 0.7 percentage points.