Sub-Saharan Africa could be headed for a growth rate last seen in 1999
The average GDP growth in Africa is predicted to drop significantly compared to last year
Africa’s rise may be slowing down.
In 2015 the economies of sub-Saharan African countries only grew by 3.0 percent, down from 4.5 percent in 2014.
This is the slowest rate of expansion since the global financial crisis in 2008, according to a new report published by the World Bank.
The bad news
The reason behind this slowdown? The plunging prices of oil and other commodities, the knock on effect of a slowing economy in China, and a generally weak global economy.
This year, the average GDP growth in Africa will be 3.3 percent, says the World Bank – a revision of their earlier prediction of 4.4 percent. The global estimate is 2.9 percent.
For sub-Saharan Africa the picture may be even worse, with London-based economic research consultancy Capital Economics predicting growth of only 2.9 percent. A rate so weak was last seen in 1999, which would mean hitting a 17-year low for the region.
The massive population expansion that the continent is going through isn’t helping – any growth that Africa does manage to create likely won’t translate in an increase in GDP per capita.
The continent’s GDP per capita growth currently sits at its lowest since 2009, at 0.5 percent.
Opportunities for growth
However, despite this negative forecast, economic activity remained steady in some countries.
In Côte d’Ivoire, for example, an increase in investment and consumer spending meant the country saw growth in many areas. Similarly, in Ethiopia and Rwanda factors such as investment in public infrastructure and a growing services sector meant that they saw solid growth.
The World Bank also noted that Kenya and Tanzania saw improved economic stability and growth, owing to expansion and in construction and service sectors.
With this mix of growth and economic slowdown come a number of opportunities. The decline in oil and commodity prices has made it clear that there is a need for increased diversification and less dependance on oil and other natural resources.
One way to do this is by investing in cities: well-managed cities can lead to economic growth, according to the report. The improved services and amenities make cities more livable for poor and middle-class residents and workers, and firms become connected more efficiently.
“With external conditions likely to remain less favorable than in the past, African countries need to accelerate the pace of structural reforms aimed at boosting competitiveness and diversification,” Punam Chuhan-Pole, World Bank Africa’s acting chief economist and author of the report, said in a statement.
“In most countries this will mean improving the business climate, reducing the cost of cross-border trade, reforming the energy sector to ensure affordable, reliable, and sustainable energy services, and making the financial sector more inclusive.”