While many countries are registering a sharp slippage in economic growth, East African economies Ethiopia included are expected to deliver above 6 percent economic growth, the World Bank has said in its latest report.
“Our analysis shows that the more resilient growth performers tend to have stronger macroeconomic policy frameworks, better business regulatory environment, more diverse structure of exports, and more effective institutions,” says Albert Zeufack, World Bank Chief Economist for Africa.
The World Bank report which notes that Rawnda and Tanzania will deliver impressive growth comes a day after Central Bank of Kenya predicted a 6 percent growth outlook for Kenya putting the East African nations in an attractive position as commodity prices bust sucks growth out of exporters.
After slowing to 3 percent in 2015, economic growth in Sub-Saharan Africa is expected to fall further to 1.6 percent in 2016, the lowest level in over two decades. The sharp decline in aggregate growth reflects challenging economic conditions in the region’s largest economies and commodity exporters.
Many of these countries continue to face headwinds from low commodity prices, tight financial conditions, and domestic policy uncertainties. Economic activity has been notably weak across oil exporters. At the same time, economic growth in about a quarter of the region’s countries is showing signs of resilience.
These latest figures are outlined in the new Africa’s Pulse, the World Bank’s twice-yearly analysis of economic trends and data for the region. Growth is far from homogeneous, suggesting that countries are growing at divergent speeds.
Despite a recent pickup, commodity prices are expected to remain largely below their 2011–14 peaks, reflecting the weak global recovery. Faced with growing financing needs, commodity exporters have begun to adjust, but efforts have been uneven and remain insufficient. Against this backdrop, a modest recovery is expected with real GDP in Sub-Saharan Africa forecasted to grow 2.9 percent in 2017, then rising moderately to 3.6 percent in 2018.
Variation across countries
Africa’s Pulse notes that the region’s economic performance in 2017 will continue to be marked by variation across countries. While the larger economies and other commodity exporters are expected to see a modest increase in GDP growth as commodity prices continue to stabilize, economic activity is expected to keep expanding at a robust pace elsewhere in the region, supported in part by infrastructure investments.
With the external environment expected to remain difficult, deeper adjustment would be needed in some countries to contain fiscal and current account deficits and rebuild policy buffers. The Pulse further argues that along with adjustments to macroeconomic policies, countries will need to accelerate structural reforms to bolster medium-term growth prospects.
The decline in oil and commodity prices has hurt resource-rich countries and signals an urgent need for economic diversification in the region, including through improvements in agriculture. Agricultural productivity growth in Africa has lagged that in other regions. While production increases elsewhere were driven by better use of inputs and improvements in production technologies, in Africa they resulted mainly from expanding the area under cultivation.