African Eye

Author:

Paul Laker
31.01.17

African Grey forecasts a turbulent 2017 for Sub-Saharan Africa

After years of high growth rates, many Sub-Saharan African (SSA) countries are now facing potential headwinds that could jeopardise their future.

According to the World Bank, growth in the SSA region is estimated to have slowed to a 1.5% rate in 2016. On a per capita basis, regional GDP contracted by an estimated 1.1%. In fact, Ernst & Young reported that 2016 was SSA’s "worst year for average economic growth" for over twenty years. Digging deeper into the data, it’s the region’s oil exporters who accounted for most of the slowdown, while activity in non-resource intensive economies generally remained robust.

Furthermore, if we look at the figures over a longer timeframe, we discover that from 2001 till 2008, SSA had been growing at an average of 5.9%, whereas from 2009 till 2016, its growth had dropped to 4.1%.

If we now look forwards, on the back of a gradual pickup in the world economy and a recovery in commodity prices, growth is projected to improve in 2017.  However, across SSA, growth is forecast to remain weak. The World Bank has downgraded SSA’s GDP forecast for 2017 and the Bank now expects economic growth of 2.9%.

Risks to the outlook are heavily tilted to the downside. The World Bank highlights how heightened policy uncertainty in the United States and Europe could lead to financial market volatility and higher borrowing costs or cut off capital flows to emerging and frontier markets. A sharper-than-expected slowdown in China could weigh on demand for export commodities and undermine prices. Continued weakness in commodity prices would strain fiscal and current account balances, forcing spending cuts that could weaken recovery and investment.

Domestic risks include the failure to adjust to low commodity prices and weak global demand. Populist pressures may deter authorities from taking the necessary measures to contain fiscal deficits and rebuild policy buffers. A further deterioration of security conditions in some countries could put strains on public finances.

Looking at how different countries are due to perform, it’s the major African economies, like Angola, Nigeria and South Africa, which face only marginal improvements in their performance for 2017. Despite the disappointing outlook for the traditional powerhouses, the story is not all bleak. There are many other African countries that are improving in leaps and bounds. Growth estimates were upgraded for Ghana, Kenya and Tanzania. Predictions are that in 2017, Cotê d'Ivoire will be next year’s fastest-growing economy, followed by Ethiopia and Tanzania.

What’s evident is the journey ahead will not be a smooth sail and is likely to be full of ups and downs. With a clear path and eye on the ground, businesses can navigate across these troubled waters to drive brand growth - but not necessarily through the traditional African markets.