August 22, 2018//-Higher commodity prices, a healthy global economy, improved agricultural output and solid government spending are seen supporting the Sub-Saharan African economy this year.
Regional GDP is seen expanding 3.4% in 2018, which is unchanged from last month’s forecast and would mark best result since 2014 if confirmed, according to FocusEconomics, a leading provider of economic analysis and forecasts for 127 countries in Africa, Asia, Europe and the Americas.
In its September 2018 estimate released this month, it noted that incoming data suggests that Sub-Saharan Africa’s (SSA) economy accelerated for the third consecutive quarter in Q2, as the region gains traction after the growth slump driven by low commodity prices.
Regional GDP is projected to have expanded 3.3% year-on-year in the second quarter, which would mark the fastest growth rate since Q1 2015 if confirmed (Q2: +3.0% year-on-year).
A supportive external environment likely boosted the recovery, thanks to higher commodity prices and healthy global demand.
However, growth dynamics have been far from uniform across economies in the region, with some countries still experiencing lackluster activity.
Major-players Nigeria and South Africa are projected to have gained steam in the second quarter, although growth remains weak in both economies. Easing inflation, improved foreign exchange rate liquidity and higher oil prices likely stoked activity in Nigeria.
However, the pick-up is expected to be modest overall as outages at key oil pipelines hampered oil exports in the quarter. Meanwhile, although manufacturing activity picked up in South Africa in the second quarter, household consumption is expected to have been hit due to a rising unemployment rate, an increase in the VAT and a weak rand.
Conversely, Ghana and Kenya are forecast to have grown at a robust pace in the second quarter, sustaining the momentum seen at the start of the year.
Solid export growth thanks to firm oil prices and higher production likely buttressed activity in Ghana in the second quarter, although the economy has lost some steam after a stellar 2017.
Meanwhile, improving business confidence thanks to reduced political tension and a recovering agricultural sector are supporting Kenya’s economy.
In the political arena, Nigeria’s ruling All Progressives Congress (APC) lost their majority in the Senate in July as several policymakers in both houses left the APC, largely to join the opposition.
The shift will limit the party’s legislative ability in the coming months and could signal that next year’s election will be a tight race.
South Africa will also go to the polls next year, which analysts have speculated was behind President Cyril Ramaphosa’s July decision to amend the constitution to allow land expropriation without compensation.
Rising public anger over the pace of land reform as the country tries to address the legacy of apartheid threatened to hurt the ruling African National Congress in the upcoming elections, although the constitutional amendment has sparked some concerns among the business community.
The report warned: “While the economy is on a more solid trajectory after growth fell to an over two-decade low in 2016, challenges to the outlook remain.
Poor infrastructure and weak business climates as well as relatively small private sectors are limiting the strength of the recovery”.
In addition, several economies are burdened with large debt, while security concerns continue to plague investment and cast a shadow on the regional outlook. Next year, growth is seen rising to 3.7%.
This month, four of the region’s economies saw their growth projections cut, including Angola, Ghana and South Africa.
However, upward revisions to Kenya and Nigeria’s GDP forecasts balanced out the downgrades so that the regional growth outlook remained unchanged.
Seven economies saw no changes to their prospects. Ethiopia and Cote d’Ivoire are expected to be the region’s fastest growing economies in 2018, expanding over 7.0%.
“Ghana is also seeing growing at a robust pace of 6.9%. Meanwhile, the larger economies are expected to perform below the regional average, with South Africa seen growing at the slowest rate of 1.5%, followed by Angola at 1.9% and Nigeria at 2.5%”.
African Eye Report
