Tuesday, April 12, 2016

Sub-Saharan Africa’s economies have lost steam

Economic activity in Sub-Saharan Africa slowed in 2015, with GDP growth averaging 3.0 percent, down from 4.5 percent in 2014. This means that the pace of expansion decelerated to the lows last seen in 2009. The plunge in commodity prices – particularly oil, which fell 67 percent from June 2014 to December 2015 – and weak global growth, especially in emerging market economies, are behind the region’s lackluster performance. Commodity price drops have lowered Africa’s terms of trade in 2016 by an estimated 16 percent, with commodity exporters seeing large terms-of-trade losses. Sub-Saharan Africa countries will continue to face low and volatile prices in global commodity markets.  In several instances, the adverse impact of lower commodity prices was compounded by domestic conditions such as electricity shortages, policy uncertainty, drought, and security threats, which stymied growth.

Housing and transport are particularly costly in urban Africa. Housing prices are about 55 percent higher in urban areas of African countries relative to their income levels. Urban transport, which includes prices of vehicles and transport services, is about 42 percent more expensive in African cities than cities in other countries. Like households and workers, firms also face high urban costs.

The World Bank report warned of “downside risks,” meaning that its predictions for growth this year and next were still vulnerable because of the global economic environment, in particular commodity prices, but also China’s industrial slowdown.

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