Prospects and Challenges for Africa
The October 2014 Africa’s Pulse released by The World Bank confirms that economic growth in Sub-Saharan Africa continues to be strong. The average growth in the region is projected to increase to 5.2 percent during 2015-16 (up from 4.6 percent in 2014) and to 5.3 percent in 2017. Some markets and industries are looking to be more promising than others but certain regional challenges continue to present unknown variables.
The Markets. Although growth in the region generally remains favorable, the differing fortunes of the region’s largest economies has moderated that growth. Economic activity in Nigeria remains robust with the growth strengthening from 6.2 percent in the first quarter to 6.5 percent in the second quarter. Low-income countries — including Cote d’Ivoire, Ethiopia, Mozambique, and Tanzania — also enjoyed healthy economic growth. In contrast, the economies of South Africa, Angola, and Ghana each experienced far more modest expansion.
The Industries. The primary drivers of growth are significant public infrastructure investment (e.g., power, ports, and transportation), “a rebound in agriculture,” and the services sector (e.g., telecommunications, financial services, and tourism). Importantly, the services sector has been “the big gainer” in the region’s economic transformation and presents “an important path” for economic diversification and accelerating poverty reduction. However, weak global growth (and related factors) has resulted in a decrease in foreign direct investment, which is an important financing source for all of these industries.
Regional Challenges. The Ebola outbreak has ravaged economic activities in Guinea, Liberia, and Sierra Leone. Initial estimates are that the combined output loss to the countries could total $359 million, which would translate to a 3 percent drop in the GDP growth of Sierra Leone and a halving of the GDP growth of both Guinea and Liberia. This crisis must be addressed and the private sector should play a critical role. Provided rapid control of further contagion, regional spillover is projected to be modest and limited to Ghana and Nigeria, which already has contained the outbreak. However, a slower containment presents a far more dire scenario for the countries and the region. Regional disruptions also may result from further intensification of the conflict in South Sudan and/or the Boko Haram insurgency in Nigeria.