Debt Loads, Others Continue to Weighing on SSA Economies

SSA data for August

July 17, 2018//-Challenging business environments, poor infrastructure and high debt loads will continue to weigh on Sub-Saharan Africa’s (SSA’s) economies.

This is the view expressed by FocusEconomicsa leading provider of economic analysis and forecasts for 127 countries  in Africa, Asia, Europe and the Americas.

In its August 2018 estimate released this month, it noted that while higher commodity prices, improved agricultural output and recovering domestic demand should drive a faster recovery, challenging business environments, poor infrastructure and high debt loads will continue to weigh on SSA economy activity.

The Consensus Forecast for the Sub-Saharan African economy in 2018 was revised down this month, the first downgrade in nearly 10 months.

Regional GDP is now seen expanding 3.4% this year, down 0.1 percentage points from last month’s forecast, although still above 2017’s 2.5% expansion.

Recovery kicks into a higher gear in the first half of 2018

A more comprehensive set of data confirmed that SSA economy picked up pace in the first quarter of 2018.

The report added: “Regional GDP increased 3.0% year-on-year in the first quarter, matching last month’s preliminary figure and surpassing the 2.8% expansion recorded in the fourth quarter of 2017.

The acceleration came on the back of firmer commodity prices and healthier domestic demand in the first quarter. Looking at the individual countries, Kenya’s economy gained traction in the first quarter, growing at the fastest pace since Q4 2016”.

A surging agricultural sector drove the economy’s pick up, as favorable weather conditions boosted output. Cote d’Ivoire and Ghana’s economies also posted strong growth, albeit decelerating slightly from the previous quarter, it further stated.

Activity in Cote d’Ivoire was supported by solid cocoa output and improving investor confidence, while a buoyant oil sector helped drive the expansion in Ghana.

The region’s largest economies were the weakest links in the first quarter. Despite a stronger performance by the energy sector, growth inched down in Nigeria in Q1, hampered by fuel and foreign exchange shortages, the report noted.

Meanwhile, falling investment and subdued consumer spending caused South Africa to record the weakest expansion since Q2 2016. National accounts data for the first quarter is still not available for Angola, it said.

The country is expected to emerge from recession this year, although the limited available economic data has so far been weak.

Higher commodity prices, the recovery’s chief tailwind, continued to support activity throughout the period, while recovering manufacturing activity in South Africa is expected to have buttressed growth.

All eyes on reforms

Researchers at FocusEconomics said: All eyes are on governments’ reform efforts to improve the region’s prospects. New leaders in Angola and Ethiopia have notably made progress in this regard, with both countries taking steps to further open their economies, including through privatizations in recent months”.

Meanwhile, policymakers in Kenya are butting heads on whether to remove the long-standing interest rate cap, a move that most analysts argue is critical to improving lending conditions.

On the other hand, the larger economies will record the slowest growth rates. The more mature economy of South Africa is seen growing the slowest at 1.6%, followed by Angola at 1.9% and Nigeria at 2.4%.

African Eye Report 

Leave a Reply

*