Last month, The World Bank released its biannual publication, Africa’s Pulse. The publication, produced by the Office of the Chief Economist for the Africa Region of the World Bank contains a broad analysis of Africa’s near-term macroeconomic outlook.
According to the publication, 2017’s economic growth is expected to have picked up to 2.6 percent from 1.5 percent in 2016. The upswing is credited to rising metal and oil production resulting from recovering commodity prices and improving agricultural conditions following draughts. Recent data point to a moderate strengthening of growth in Africa. Growth is projected to pick up to 3.1 percent this year, and to firm to an average of 3.6 percent in 2019-20, reflecting a gradual pick up in the region’s major economies – Nigeria, South Africa and Angola. The positive forecast is hinged on the stability of prices of metals and oil, robust expansion in global trade, and governments in the region tackling macroeconomic imbalances and boosting investments through reforms. Last year saw a rebound in consumer spending as moderate inflation boosted domestic demand. Improving agricultural production coupled with currency stability is projected to ease inflationary pressure allowing for accommodative monetary policies in some countries.
Despite the positive outlook, many challenges remain. The job market has not kept pace with the burgeoning number of entrants in the labor force. Also, rising public debt is raising fears of unsustainable public debt levels. Growth in non-resource sectors in oil and metal exporters has yet to pick up reinforcing the need for diversification and value addition. Structural transformation will play a huge part in sustaining growth and transforming the region’s economies. Poverty still remains widespread and a positive turn in per-capita GDP will do little to reduce poverty significantly. On the demand side, fiscal policy is set to remain tight due to the need to rebuild buffers to enhance resilience and tackle rising public debt.
Sustaining growth will require renewed focus on structural transformation. This will support private sector activities by providing an enabling environment and ensure faster pick up in GDP growth. Reforms are needed to bolster diversification and boost productivity. Increasing the quality and quantity of telecommunication, transport, electric power and water and sanitation infrastructure would be critical to structural transformation.