Africa Economy: World Bank forecasts Africa's economy to slow in 2015

Sub-Saharan Africa's growth will slow in 2015 to 3.7 percent from 4.6 percent in 2014, reaching the lowest growth rate since 2009 amid weak global economic conditions, the World Bank projected on Monday.

The bank's new Africa's Pulse, the biannual analysis of economic trends released in Nairobi, says 2015 forecast remains below the robust 6.5 percent growth in GDP which the region sustained in 2003-2008, and drags below the 4.5 percent growth following the global financial crisis in 2009.

"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," Punam Chuhan-Pole, the bank's Acting Chief Economist and lead author of the report told journalists via a teleconferencing.

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.

The report says governments can boost revenues through taxes and improved tax compliance, noting that complementing these efforts, governments can improve the efficiency of public expenditures to create fiscal space in their budget.

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 the report.

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

"The dramatic, ongoing drop in commodity prices has put pressure on rising fiscal deficits, adding to the challenge in countries with depleted policy buffers," Chuhan-Pole said.

"To withstand new shocks, governments in the region should improve the efficiency of public expenditures, such as prioritizing key investments, and strengthen tax administration to create fiscal space in their budgets."

Makhtar Diop, World Bank Vice President for Africa, said the end of the commodity super-cycle poses an opportunity for African countries to reinvigorate their reform efforts and thereby transform their economies and diversify sources of growth.

"Implementing the right policies to boost agricultural productivity, and reduce electricity costs while expanding access, will improve competitiveness and support the growth of light manufacturing," Diop said.

The report said 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. In Burundi and South Sudan, threats from political instability and social tensions are taking an economic and social toll.

According to the report, several countries are, however, continuing to post robust growth.

Cote d'Ivoire, Ethiopia, Mozambique, Rwanda and Tanzania are expected to sustain growth at around 7 percent or more per year in 2015-17, spurred by investments in energy and transport, consumer spending and investment in the natural resources sector. Endit