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Easing commodity super-cycle trims Africa’s growth projections

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According the most recent edition of Africa’s Pulse, the World Bank’s twice-yearly analysis of the issues shaping Africa’s economic prospects, growth in sub-Saharan African countries looks set to slow to 4% from 4.5% this year due to the fall in oil prices and other commodities.  South Africa, in particular looks to be a significant drag on the rest of the region – once the country’s data is excluded from the analysis, the growth forecast for the rest of sub-Saharan Africa is projected to be 4.7% for the year.

The 4% forecast for the whole sub-Saharan region is below the average 4.4% average annual growth rate of the last two decades and considerably less than the 6.8% seen in the region between 2002 and 2008.

Sub-Saharan Africa is a net exporter of primary commodities, with oil being the most important commodity traded in the region, followed by gold and natural gas.  Africa’s Pulse finds that prices of other commodities are closely correlated with the oil price and with one another.  Consequently, terms of trade between most countries in the region are declining. The 36 African countries with expected terms-of-trade deterioration are home to 80 percent of the population and 70 percent of the economic activity in the region.

In spite of this, some countries are better able to withstand the impact of falling commodity prices.  In Nigeria, growth is expected to rebound in 2016 due to its relatively diversified economy and buoyant services sector.  Less diversified oil producers like Angola and Equatorial Guinea, however, will continue to have weaker prospects.  In oil-importing countries like Cote d’Ivoire, Kenya, and Senegal, growth is expected to remain strong.

“Despite strong headwinds and new challenges, Sub-Saharan Africa is still experiencing growth. And with challenges come opportunities,” the press release quotes Makhtar Diop, World Bank Vice President for Africa as saying. “The end of the commodity super-cycle has provided a window of opportunity to push ahead with the next wave of structural reforms and make Africa’s growth more effective at reducing poverty.”

In addition to improved macroeconomic policies, structural reforms are needed across the region to kick start and maintain productivity growth across all sector and helping to foster a job-creating, inclusive, transformative environment. Achieving lower transport costs, cheaper, reliable power and building a better educated and skilled workforce will benefit all sectors in the region.

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