World Bank cuts Africa’s growth for 2016 to 1.7%

The World Bank on Thursday projected that Africa’s economy will further fall to 1.7 per cent in 2016 after slowing to 3 percent in 2015, the lowest level in over two decades.

In its bi-yearly ‘African Pulse’ report, the World Bank pointed out that the sharp decline in aggregate growth reflects the challenging economic conditions in the region’s largest economies and commodity exporters namely Angola, Nigeria, and South Africa, who continue to face headwinds from lower commodity prices, tighter financing conditions, and droughts.

However, it also noted there was economic growth in over a quarter of countries that have shown signs of resilience, adding that “indeed, the pattern of growth across countries is far from homogeneous, suggesting that Sub Saharan Africa is growing at divergent speeds.

“While many countries are registering a sharp slippage  in  economic  growth,  some  countries—Ethiopia,  Mali, Mozambique,  Rwanda,  and Tanzania—have continued to post annual average growth rates  of over 6 percent, exceeding the  top tercile of the regional  distribution;  and  several  other  countries—including  Côte d’Ivoire—have moved into the top tercile of performers.  The “established”  and  “improved” performers  tend  to  have stronger  quality  of  monetary  and  fiscal  policies,  better  business regulatory  environment,  more  diverse structure  of  exports,  and  more  effective  public institutions, the report added.

The report said commodity prices are expected to remain largely below their 2011–14 peak, despite a recent pickup, reflecting a weak global recovery.

The Bank urged the continent’s policy makers to bolster medium-term growth prospects through structural reforms, address fiscal vulnerabilities, and build buffers to withstand periods of global finance turbulence and tighter external finance conditions.

“Increasing agricultural productivity is central to transforming Sub-Saharan African economies and promoting sustained and inclusive growth. However, agriculture output growth in the region has largely been a result of expanding the area under cultivation rather than productivity gains: the contribution of area expansion accounted for more than three times as much of the growth in agriculture in the region relative to other developing countries.

“Yet,  conditions  are  in  place  for  boosting  the  productivity  of  African  agriculture  and  for sustainable agricultural  growth.  African  regional  markets  are  growing  rapidly—driven  by population,  urbanization,  and income  growth—providing  demand  incentives  and  import substitution  potential.  On  the  supply  side,  the prospects  are  promising  as  well,  thanks to untapped yield potential and a supportive political environment.

“Unleashing  productivity  improvements  requires  public  investments  in  rural  public  goods. Although investments to strengthen markets, develop and disseminate improved technologies, promote input use, and build an agricultural information base have increased, they remain well under targets and needs. Addressing the quality of public spending and the efficiency of resource use is even more critical than addressing the level of spending.

“Sub-Saharan African countries grossly underfund high-return investments, and rebalancing the composition of public agricultural spending could reap massive payoffs.  Most importantly, experience teaches us that investments need to tackle constraints on different fronts. For reforms to be sustainable, they  need  to  be anchored  in  managing  political pressures  and  use  external  processes  as commitment devices,” the report stated.