November 10, 2017//-FocusEconomics, a leading provider of economic analysis and forecasts for 127 countries in Africa, Asia, Europe and the Americas, says more comprehensive data reveals that the Sub-Saharan Africa (SSA) economy’s recovery accelerated in the second quarter, albeit at a slightly slower pace than estimated last month.
According to a second estimate compiled by FocusEconomics, regional GDP increased 2.6% annually in second quarter (Q2), a notch below the preliminary estimate of 2.5% growth.
However, the result is a notable improvement from Q1’s 1.9% increase as a turnaround in the region’s two largest economies—Nigeria and South Africa—shored up growth.
“On top of an improved performance in the major players, positive dynamics were seen across nearly all of the region’s economies for which GDP data is available. Ghana’s growth soared in the second quarter, to 9.0% annually”, it stated.
A standout performance from the oil and gas sector drove the buoyant reading. In addition, GDP growth rose in Kenya, as a rebound in agricultural output and growing demand for real estate boosted the economy’s momentum.
Similarly, the report noted that a better performance in the agricultural sector fueled a pick-up in activity in Uganda. In contrast, Cote d’Ivoire’s economy slowed slightly in the second quarter, amid a steep fall in the prices of cocoa.
Despite the slowdown, activity still expanded at a brisk pace of around 8.0% annually, according to the report.
OUTLOOK for Commodities prices and more accommodative monetary policy to boost recovery in 2018
The economy of Sub-Saharan Africa is expected to grow a moderate 2.4% in 2017 and then gain steam next year. Stronger activity in Nigeria and South Africa should propel the region as both economies benefit from more accommodative monetary policies and growing confidence.
In addition, higher commodities prices should boost growth in a number of countries in the region. FocusEconomics analysts held their forecasts for 2018 unchanged this month and see GDP growing 3.4%. In 2019, growth is projected to pick up to 3.7%.
Behind the stable forecast are unchanged projections for 2018 for seven of the region’s thirteen economies. However, DR Congo, Ghana and Nigeria had their forecasts cut. In contrast, prospects were raised for Ethiopia, Kenya and Zambia.
Cote d’Ivoire and Ethiopia are expected to be the fastest-growing economies next year, with growth of 7.0% or more. On the flip side, the region’s heavyweights will be the poorest performers: South Africa is expected to grow 1.3%, followed by Angola with 2.6% growth and Nigeria with a 2.6% expansion.
NIGERIA: Risk of violence flaring up hampers outlook
The economy entered a recovery in Q2, with GDP growing for the first time since Q3 2015. Higher oil output and positive dynamics in the agricultural sector helped the economy exit recession, and incoming data for the third quarter suggests that the momentum continued to build in the subsequent months.
The PMI recorded its best quarter since Q4 2014 in Q3, and oil production rose in September according to OPEC’s monthly report. While encouraging signs are emerging throughout the economy, the recovery is likely to be fragile and is at risk of being derailed by a military conflict in the oil-rich Niger Delta region.
Tensions between militants and the government remain high, and a number of analysts speculate that violence could flare up ahead of the 2019 elections. After GDP plunged in 2016, FocusEconomics panelists see the economy growing a modest 1.6% in 2017 thanks to higher oil output and recovering oil prices.
Next year, growth should gain steam on the back of firmer activity in both the oil and non-oil sectors. However, uncertainties over stability in the Niger Delta, a weak fiscal position and foreign exchange distortions are clouding the outlook.
The panel sees GDP expanding 2.6% in 2018, which is down 0.1 percentage points from last month’s forecast. In 2019, GDP is see growing 3.1%.
SOUTH AFRICA: Data for Q3 points to improving momentum
There continue to be promising signs, following the economy’s exit from technical recession in Q2. The recovery in agricultural output carried into in Q3, and consumer confidence is increasing on the back of moderating inflation and higher real wage growth.
Adding to the good news, manufacturing output expanded in August for the first time this year. This positive data, should, however, be taken cautiously.
Endless political bickering constitutes the biggest stumbling block to faster GDP growth, and it continues to weigh on business confidence and stave off future investment.
In September, the manufacturing PMI dipped further into contractionary territory, and business sentiment remained abysmally low despite improving from the over 30-year low recorded in August.
Furthermore, political noise is set to remain elevated in the foreseeable future as the country gears up for the African National Congress (ANC ) Conference in December, when a new presidential candidate for next year’s election will be chosen.
The economy is expected to recover at a steady pace. Q2’s better-than-expected print led many panelists to revise up their GDP forecasts for 2017, and economic growth should edge higher in 2018 and 2019 on higher commodities prices. Nevertheless, risks are tilted to the downside.
Political developments and the possibility of lower-than expected prices for commodities are weighing on growth. FocusEconomics panelists expect the economy to grow 1.3% in 2018, and 1.8% in 2019.
ANGOLA: Bold reforms unlikely under new leadership
A new era in Angolan politics began after João Lourenço was sworn in as the country’s president on 26 September, following 38 years of uninterrupted rule by his predecessor, José Eduardo dos Santos.
The new president started his term with bold promises to fight endemic corruption and revive economic activity. His ambitious plans were, however, received skeptically by political opponents and analysts alike, as the long-serving former president still wields vast influence in the country’s political life, and the dos Santos family remains in power in key government posts, including at the state oil company.
The likelihood of radical policy changes is slim, since any attempt to push through far-reaching reforms could pit the incumbent against dos Santos. This does not bode well for a country that is plagued by market distortions in the FX system and persistent government interventions in the economy, which stifles growth in the private sector.
The oil-dependent Angolan economy is expected to benefit from the ongoing upturn in oil markets. Nevertheless, growth will remain anemic and constrained by persistent challenges faced by the non-oil economy. Analysts expect GDP to expand 2.6% in 2018, which is unchanged from last month’s forecast. For 2019, growth is expected to reach 2.7%.
KENYA: Political noise continues to weigh on economic momentum
Kenya’s turbulent political scene took another unexpected turn when opposition leader Raila Odinga—who had launched the legal challenge to Uhuru Kenyatta’s victory in the annulled 8 August vote—announced his withdrawal from the election re-run slated for 26 October.
Gripped by protracted uncertainties amid prolonged political deadlock, economic activity has been severely disrupted and growth prospects damaged in an economy that was until recently among East Africa’s fastest growing.
Data from Q3 indicates that, although the shilling remains resilient, the economy has deteriorated significantly since recording annual GDP growth of 5.0% in Q2 (Q1: 4.7% year-on-year).
In September, the PMI plunged to a new record low following a notable drop in August, reflecting the dire state of the private sector. On 2 October, Moody’s put Kenya’s rating on review for a downgrade, citing persistent large fiscal deficits and uncertainties over policy direction.
The prolonged political impasse, exacerbated by the continuation of the government’s interest rate cap on commercial bank lending rates, which has stifled growth in private credit, will continue to weigh heavily on the economy and threatens to hinder regional partners through negative spillover effects including reduced trade.
Although the government has announced intentions to scrap the cap policy, the timeline remains unclear. Growth is expected to pick up, however, as the agriculture sector recovers from a long drought. FocusEconomics panelists forecast GDP growth of 5.4% in 2018, which is up 0.2 percentage points from last month’s forecast, and sees it rising to 5.9% in 2019.
MONETARY SECTOR: Inflation inches down in September
Price pressures eased slightly in September, as inflation fell from August’s 12.7% to 12.6%, according to preliminary data compiled by FocusEconomics. While inflation has eased in the majority of economies in the region since the beginning of the year, price pressures are still high in certain economies, notably in Angola, the DRC, Mozambique and Nigeria.
Angela Bouzanis Senior Economist at FocusEconomics added: “After a large upward revision to the region’s price projection last month on the back of soaring inflation in the DRC due to a drastic weakening of the currency, FocusEconomics analysts held the inflation forecast for 2018 unchanged this month. Regional inflation is seen averaging 10.0% in 2018”.
“In 2019, our panel expects regional inflation to average 8.3%”, she noted. Full report: https://www.focus-economics.com/online-store/products/annual-subscription/sub-saharan-africa
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