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Sub-Saharan Africa countries are continuing to grow, albeit at a slower pace, due to a more challenging economic environment, the World Bank has said.

According to new projections of the multilateral lender, growth will slow in 2015 to 3.7 per cent from 4.6 per cent in 2014, reaching the lowest growth rate since 2009.

These latest figures are outlined in the World Bank’s new Africa’s Pulse, the twice-yearly analysis of economic trends and the latest data on the continent. The 2015 forecast remains below the robust 6.5 per cent growth in GDP which the region sustained in 2003-2008, and drags below the 4.5 per cent growth following the global financial crisis in 2009-2014.

Overall, growth in the region is projected to pick up to 4.4 percent in 2016, and further strengthen to 4.8 percent in 2017.  Sharp drops in the price of oil and other commodities have brought on the recent weakness in growth.

Other external factors such as China’s economic slowdown and tightening global financial conditions weigh on Africa’s economic performance, according to Africa’s Pulse.

Compounding these factors, bottlenecks in supplying electricity in many African countries hampered economic growth in 2015.

According to Africa’s Pulse, several countries are continuing to post robust growth. Cote d’Ivoire, Ethiopia, Mozambique, Rwanda and Tanzania are expected to sustain growth at around seven per cent or more per year in 2015-17, spurred by investments in energy and transport, consumer spending and investment in the natural resources sector.

Gains in poverty reduction

Africa’s Pulse found that progress in reducing income poverty in Sub-Saharan Africa has been occurring faster than previously thought.

According to World Bank estimates poverty in Africa declined from 56 per cent in 1990 to 43 per cent in 2012.  At the same time, Africa’s population saw progress in all dimensions of well-being, particularly in health (maternal mortality, under-five mortality) and primary school enrollment, where the gender gap shrank.

Yet African countries continue to face a stubbornly high birth rate, which has limited the impact of the past two decades of sustained economic growth on reducing the overall number of poor.

Weaker commodity prices

 Sub-Saharan Africa’s rich natural resources have made it a net exporter of fuel, minerals and metals, and agricultural commodities. These commodities account for nearly three-fourths of the region’s goods exports.

Robust supplies and lower global demand have accounted for the decline of commodity prices across the board. For instance, the drop in the prices of natural gas, iron ore, and coffee exceeded 25 per cent since June 2014, according to the report.

 Africa’s Pulse notes that overall decline in growth in the region is nuanced and the factors hampering growth vary among countries. In the region’s commodity exporters — especially oil-producers such as Angola, Republic of Congo, Equatorial Guinea, and Nigeria, as well as producers of minerals and metals such as Botswana and Mauritania, the drop in prices is negatively affecting growth.

In Ghana, South Africa, and Zambia, domestic factors such as electricity supply constraints are further stemming growth, the report noted.

Fiscal deficits across the region are now larger than they were at the onset of the global financial crisis, the report found. Rising wage bills and lower revenues, especially among oil-producers, led to a widening of fiscal deficits.

In some countries, the deficit was driven by large infrastructure expenditures. Reflecting the widening fiscal deficits in the region, government debt continued to rise in many countries.

While debt-to-GDP ratios appear to be manageable in most countries, a few countries are seeing a worrisome jump in this ratio.

Moving forward

Growth in Sub-Saharan Africa will be repeatedly tested as new shocks occur in the global economic environment, underscoring the need for governments to embark on structural reforms to alleviate domestic impediments to growth, the report notes.

Investments in new energy capacity, attention to drought and its effects on hydropower, reform of state-owned distribution companies, and renewed focus on encouraging private investment will help build resiliency in the power sector.

Governments can boost revenues through taxes and improved tax compliance.

Complementing these efforts, governments can improve the efficiency of public expenditures to create fiscal space in their budget.