Sub-Saharan African economies are expected to grow at a faster pace of 3.8% this year, supported by stable prices that have allowed policymakers to ease monetary conditions, the World Bank said on Tuesday (7).
The upward revision from 3.5% projected in April was driven by the stabilization of exchange and inflation rates in countries such as Ethiopia, creating room for interest rate cuts, according to the bank’s semi-annual Africa’s Pulse report.
“These favorable conditions are fueling a recovery in private consumption and investment,” the report stated, while warning that “fiscal consolidation efforts may slow the pace of recovery in some economies.”
Growth is expected to accelerate to an average annual rate of 4.4% over the next two years, a slight increase from the previous forecast of 4.3%.
According to the report, growth projections for 30 out of the 47 economies that make up the region (as defined by the institution) have been revised upward. “Median inflation is below 4%. Moreover, most currencies that had been in free fall against the U.S. dollar have recovered and are now stable,” said Andrew Dabalen, the World Bank’s Chief Economist for Africa, during a press conference.
The 10% weakening of the U.S. dollar since the start of the year has also contributed to a more favorable outlook for emerging markets in general.
Major Economies Revised Upward
The bank raised its growth forecasts for Ethiopia, Nigeria, and Côte d’Ivoire, three of the region’s key economies. Real incomes are also rising at a faster pace this year, a trend expected to continue over the next two years.
“While this marks a gradual recovery after a decade of successive shocks, the rebound has yet to gain strong momentum,” the report noted.
However, regional economic prospects face risks from trade uncertainty driven by the policies of U.S. President Donald Trump, high debt burdens, and the pressing need to create jobs for millions of young people entering the labor market.
“Trade challenges remain very high. We don’t know how this will play out because many negotiations are still ongoing,” Dabalen said, citing the expiration of the African Growth and Opportunity Act (AGOA) — a key trade deal between the U.S. and African countries.
Job Creation to Prevent Youth Unrest
The World Bank urged governments to focus on creating quality jobs by improving the overall business environment to foster small and medium-sized enterprises.
“These jobs must provide a decent wage and a secure livelihood,” Dabalen said, adding that three-quarters of jobs in the region are in the informal sector.
The lack of employment opportunities and other grievances have triggered youth-led protests in Kenya, Nigeria, and Madagascar since last year, highlighting the scale of the challenge for policymakers.
“The consequences of not addressing these issues are difficult to contemplate. They would be highly disruptive, and I think we are beginning to see the signs of that,” the World Bank’s chief economist warned.
Source: Reuters
