Nigeria and other sub-Saharan Africa’s economies have lost steam because of the collapse of global commodity prices and will continue to struggle to regain momentum this year, the World Bank warned on Monday, reports The Wall Street Journal.
The average growth rate in the region came in at 3% last year, a severe slowdown of 1.5 percentage points from the year before, the World Bank said in its twice-yearly Africa Pulse economic update. That is the slowest rate of economic expansion since 2009, when sub-Saharan Africa suffered delayed blowback form the global financial crisis.
In 2016, growth is seen accelerating a little, to 3.3% points, a performance the bank calls “lackluster.”
The report blamed “low commodity prices, weak global growth, rising borrowing costs, and adverse domestic developments in many countries” for the slowdown across the region, noting that worst-hit were “the region’s largest commodity exporters.”
Still, the World Bank singled out some “bright spots” on the continent, naming Ivory Coast and Kenya as good performers. Ivory Coast is a major cocoa exporter and hasn’t been affected by the commodities crash, while Kenya, East Africa’s biggest economy, is a net importer of energy, meaning it is set to benefit from low oil prices.
A stronger recovery would have to wait until between 2017 and 2018, the World Bank said, predicting a return to a 4.5% average growth rate hinging on the economic recovery of the continent’s biggest economy, Nigeria, as well as South Africa and Angola.
Angola last week announced it was in talks to secure a bailout from the International Monetary Fund, weeks after Kenya had said it had renewed and even boosted a precautionary loan agreement. The Fund is helping Mozambique and Ghana with loans, too, and is expected to begin talks in earnest with Zambia later this year.
The increased IMF lending activity across the continent highlights the higher borrowing costs these countries are facing in international capital markets, a sharp change since 2013 when Eurobond issuance by African sovereigns was becoming a growing trend.
It also marks an about turn for many of these countries now rushing to get IMF expertise in economic policy-making, having in recent years concluded IMF programmes and pledged never to look back.
The World Bank report warned of “downside risks,” meaning that its predictions for growth this year and next were still vulnerable because of the global economic environment, in particular commodity prices, but also China’s industrial slowdown.