Nigeria, South Africa lead Africa’s economic growth ―World Bank

NIGERIA and South Africa are leading Sub-Sahara Africa toward as economic growth the World Bank has revealed.

The new Africa’s Pulse bi-annual analysis of the state of African economies conducted by the World Bank, “economic growth in Sub-Saharan Africa is recovering at a modest pace, and is projected to pick up to 2.4 percent in 2017 from 1.3 percent in 2016.”

This rebound, the analysis said “is led by the region’s largest economies. In the second quarter of this year, Nigeria pulled out of a five-quarter recession and South Africa emerged from two consecutive quarters of negative growth.”

The report noted that “improving global conditions, including rising energy and metals prices and increased capital inflows, have helped support the recovery in regional growth.”

The report however, warns that the pace of the recovery remains sluggish and will be insufficient to lift per capita income in 2017.

It projected sub-Saharan Africa to see a moderate increase in economic activity, with growth rising to 3.2 percent in 2018 and 3.5 percent in 2019 as commodity prices firm and domestic demand gradually gains ground, helped by slowing inflation and monetary policy easing.

The report noted that “headline inflation slowed across the region in 2017 amid stable exchange rates and slowing food price inflation due to higher food production. Fiscal deficits have narrowed, but continue to be high, as fiscal adjustment measures remain partial. As a result, government debt remains elevated.”

“Across the region, additional efforts are needed to address revenue shortfalls and contain spending to improve fiscal balances” the report said.

Albert Zeufack, World Bank Chief Economist for Africa noted that “most countries do not have significant wiggle room when it comes to having enough fiscal space to cope with economic volatility.

“It is imperative that countries adopt appropriate fiscal policies and structural measures now to strengthen economic resilience, boost productivity, increase investment, and promote economic diversification.”

The economic expansion in West African Economic and Monetary Union (WAEMU) countries is expected to proceed at a strong pace on the back of solid public investment growth, led by Côte d’Ivoire and Senegal.

“The outlook for the region remains challenging as economic growth remains well below the pre-crisis average,” says Punam Chuhan-Pole, World Bank Lead Economist and lead author of the report.

“Moreover, the moderate pace of growth will only yield slow gains in per capita income that will not be enough to harness broad-based prosperity and accelerate poverty reduction.”

Analysis shows that rising capital accumulation has been accompanied by falling efficiency of investment spending in countries where economic growth has been less resilient to exogenous shocks.

This suggests that the inefficiency of investment—which reflects insufficient skills and other capabilities for the adoption of new technologies, distortive policies, and resource misallocation, among other things—will need to be reduced if countries are to capture fully the benefits of higher investment.