World Bank’s new Africa’s Pulse, a twice-yearly analysis of the issues shaping Africa’s economic prospects revealed that Ebola, Terrorism and other risks may pose serious challenge to the projected 5.2% economic growth in Africa.
It said, significant public investment in infrastructure, increased agricultural production and expanding services in African retail, telecoms, transportation, and finance, are expected to continue to boost growth in the region.
This pick-up in growth it said, is expected to occur in a context of lower commodity prices and lower foreign direct investment as a result of subdued global economic conditions.
The World Bank’s Chief Economist for Africa, Francisco Ferreira said, “Overall, Africa is forecast to remain one of the world’s three fastest growing regions and to maintain its impressive 20 years of continuous expansion required preparedness include rising fiscal deficits in a number of countries; economic fallouts from the activities of terrorist groups such as Boko Haram and Al Shabaab and, most urgently, the onslaught of the Ebola epidemic in West Africa.”
A World Bank study of the likely economic impact of Ebola, released last month, suggested that if the virus continues to spread in the three worst-affected countries, its economic impact could grow eight-fold, dealing a potentially catastrophic blow to the already fragile states of Guinea, Liberia and Sierra Leone. The World Bank Group is mobilizing a $400 million financing package for the countries hardest hit by the crisis.
World Bank said, growth slowed notably in South Africa, the region’s second largest economy, due to structural issues and low investor confidence.
The South African economy expanded a modest 1.0 percent year-on-year in the second quarter of 2014, its lowest growth rate since the 2009 financial crisis. By contrast, economic activity strengthened in Nigeria, the region’s largest economy.
GDP advanced 6.5 percent year-on-year in the second quarter, up from a 6.2 percent expansion in the first quarter.
Growth also remained robust in many of the region’s low-income countries including notably Cote d’Ivoire, Ethiopia, Mozambique, and Tanzania.
In Cote d’Ivoire, for example, a strong increase in cocoa production and rice output boosted agriculture growth and helped to sustain the country’s high growth.
Ethiopia’s robust growth continued to be supported by agriculture, as well, and by public investment, particularly in infrastructure.
Inflation rates edged up in a number of countries, but were more of a concern in the frontier market countries that also sustained large currency depreciations–notably Ghana.
In a few cases, including Ghana and Zambia, the fiscal position remained weak due to increasing current expenditures, led by rising wage bills, and in some cases weaker revenues. Large fiscal deficits are reducing fiscal buffers and affecting these countries’ ability to respond to exogenous shocks.
A World Bank Lead Economist for Africa and co-author of Africa’s Pulse, Punam Chuhan-Pole said, “Nearly two decades of strong growth is transforming Africa’s economies, but the structural change is not what the world expected. The majority of Africa’s jobs continues to be in agriculture and is surging into services – but not into industry and manufacturing.
“The good news is that in Africa this growth in agriculture and the services sector has been more effective in reducing poverty than growth in industry. In the rest of the world, by contrast, industry and services have a larger impact on reducing poverty.”