Growth in the three largest Sub-Saharan economies — Nigeria, SA and Angola — pulled back sharply with SA, the region’s second-largest economy, growing the least as electricity shortages worsened and policy tightening was accelerated to curb inflation, the World Bank says.
The World Bank’s Global Economic Prospects report released on Tuesday shows that SA continues to be a drag on the continent’s growth prospects, estimated to expand by only 1.9% in 2022, previously 2.1%.
Nigeria and Angola are both expected to grow 3.1% in 2022.
“Policy uncertainty, flagging external demand, and disruption due to floods and strikes weighed on [SA] growth,” the World Bank said. “Fiscal policy is expected to remain a drag on growth as further consolidation measures are required to lower elevated debt burdens, especially given the possibility that the government may take on a large portion of the debt of the state power company Eskom.”
The bank said the 0.2 percentage point downgrade in SA’s growth from June’s projections also reflects the impact of the rising cost of living and weakening of the terms of trade due to falling global metal prices.
The bank added that tight global financial conditions, political and policy uncertainty, together with weak activity in SA’s major trading partners — China, the eurozone, the UK and the US, which account for more than 40% of exports — will further constrain growth and widen external vulnerabilities.
‘Unemployment, power cuts’
“Further domestic policy tightening is bound to temper domestic demand and investment, while high unemployment and worsening power cuts will also weigh on growth.
“Implementation of much-needed reforms to remove structural bottlenecks has remained slow,” the director of the World Bank’s Prospects Group, Ayhan Kose, said.
The latest report comes as crises facing the world intensify. Its forecasts indicate a sharp, long-lasting slowdown, with global growth declining to 1.7% in 2023 from 3% expected just six months ago.
The deterioration in the global economy has been broad-based, and in virtually all regions of the world. This means per capita income growth will be slower than it was during the decade before Covid-19.
Setbacks to global prosperity are likely to persist.
The World Bank said that in comparison with the June forecast, growth was revised down for almost 60% of countries, including downward revisions for more than 70% of metal exporters, which are expected to be affected by the further easing of global metal prices.
World Bank Group president David Malpass said that even as cost-of-living pressures are anticipated to moderate, the negative impact of persistent poverty and food insecurity on growth — amplified by other vulnerabilities, such as unfavourable weather, high debt, policy uncertainty, and violence and conflict — is expected to keep the pace of recoveries subdued in many countries.
Pandemic
The bank said that by the end of 2024, GDP levels in emerging market and developing economies will be about 6% below the level expected on the eve of the pandemic.
This is even more so as median income levels continue to be eroded by inflation, currency depreciation and underinvestment in people and the private sector.
“Subdued investment is a serious concern because it is associated with weak productivity and trade, and dampens overall economic prospects. Without strong and sustained investment growth, it is simply impossible to make meaningful progress in achieving broader development and climate-related goals,” Kose said.
He said national policies to boost investment growth need to be tailored to country circumstances but they always start with establishing sound fiscal and monetary policy frameworks and undertaking comprehensive reforms in the investment climate.
For Sub-Saharan Africa, the report shows growth forecasts of 3.6% in 2023 and 3.9% in 2024.
“This growth slowdown represents a formidable challenge for economic development in Sub-Saharan Africa,” Kose said.
He said per capita incomes in the region are expected to increase only 1.2% on average in 2023/2024, a much slower rate than what is needed to sustain progress in poverty reduction and reverse income losses suffered because of the Covid-19 pandemic.
“This year, incomes per capita in Sub-Saharan Africa are forecast to remain more than 1% lower than in 2019. Even by the end of 2024, per capita incomes in almost 40% of countries, including Sub-Saharan Africa’s three largest economies, are expected to be below their pre-pandemic levels,” Kose said.
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