A World Bank report released on Monday foresees a slum to 4.0 per cent this year as against 4.5 per cent in 2014.

Africa’s Pulse, a twice-yearly World Bank Group analysis of the issues shaping economic prospects released on Monday April 13, 2015 in Washington, United States of America has revealed that countries of Sub-Saharan Africa will suffer economic slowdown in 2015. The report predicts that the sub-region’s growth will slow in 2015 to 4 per cent from 4.5 per cent in 2014, before picking up moderately in 2016. The 2015 forecast is below the 4.4 per cent average annual growth rate of the past two decades.  

Challenges

Economic activity is being impacted by the sharp fall in commodity prices. Lower oil prices are containing inflationary pressures in some countries. In contrast to oil exporters, the oil price plunge has provided support to real incomes in oil-importing countries. The fall in terms of trade in Cameroon, the Democratic Republic of Congo and Guinea comes primarily from oil. The decline in the prices of cocoa has also been blamed for the deterioration of terms of trade in Cameroon. Another area where the shoe pinches is insecurity.

The World Bank reports that persistent conflict in a number of areas, and recent violence by extremist groups such as Boko Haram and Al Shabaab pose security risks with the potential to undermine development gains. Although substantial progress has been made against the Ebola epidemic, the World Bank notes that it remains premature to declare victory until there are zero cases left. This has helped to weaken the economies of the countries concerned.

Notwithstanding, “Large fiscal deficits and inefficient government spending remains 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,” says a World Bank lead Economist for Africa and co-author of Africa’s Pulse, Punam Chuhan-Pole.

Prospects

The report recommends structural reforms as a means to ignite and sustain productivity in all sectors, but especially prioritizing agriculture and diversifying rural economies. Boosting fundamentals such as lower transport costs, cheaper and more reliable power, and a more educated and skilled labour force will benefit all sectors. The report advocates a shift in spending priorities that support both efficiency of public expenditure and long-term growth.

The World Bank stressed that the commodity price shock highlights the need for exporters to diversify their economies-both output and fiscal revenues-away from primary commodities, which require them to implement deep structural reforms that will remove impediments to private sector activity and improve the business environment. The World Bank’s Chief Economist for Africa, Francisco Ferreira said; “As previously forecast, external tailwinds have turned to headwinds for Africa’s development.

It is in these challenging times that the region can show that it has come of age, and can sustain economic and social progress on its own strength. For starters, recent gains for the poorest Africans must be protected in those countries where fiscal and exchange rate adjustments are needed.”