Economic growth in Sub-Saharan Africa is forecast to
slow again in 2016, according to the latest update of the World Bank’s Global
Economic Prospects report.
The cut in growth is 2.5 percent from an estimated 3.0
percent in 2015, as commodity prices are expected to remain low, global
activity is anticipated to be weak, and financial conditions are tightening.
The report says oil exporters are not likely to
experience any significant pickup in consumption growth, while lower inflation
in oil importers should support consumer spending.
However, food price inflation due to drought, high
unemployment, and the effect of currency depreciation could offset some of the
advantage as investment growth is expected to slow in many countries as
governments and investors cut or delay capital expenditures in a context of
fiscal consolidation.
The Bank’s global forecast for 2016 is down to 2.4
percent from the 2.9 percent pace projected in January. The move is due to
sluggish growth in advanced economies, stubbornly low commodity prices, weak
global trade, and diminishing capital flows.
According to the report,
commodity-exporting emerging market and developing economies have struggled to
adapt to lower prices for oil and other key commodities, and this accounts for
half of the downward revision. Growth in these economies is projected to
advance at a meager 0.4 percent pace this year, a downward revision of 1.2
percentage points from the January outlook.
“This sluggish growth
underscores why it’s critically important for countries to pursue policies that
will boost economic growth and improve the lives of those living in extreme
poverty,” said World
Bank Group President Jim Yong Kim. “Economic
growth remains the most important driver of poverty reduction, and that’s why
we’re very concerned that growth is slowing sharply in commodity-exporting
developing countries due to depressed commodity prices.”
Commodity-importing emerging markets and developing
economies have been more resilient than exporters, although the benefits of
lower prices for energy and other commodities have been slow to materialize.
These economies are forecast to expand at a 5.8 percent rate in 2016, down
modestly from the 5.9 percent pace estimated for 2015, as low energy prices and
the modest recovery in advanced economies support economic activity.
Among major emerging
market economies, China is forecast to grow at 6.7 percent in 2016 after 6.9
percent last year. India’s robust economic expansion is expected to hold steady
at 7.6 percent, while Brazil and Russia are projected to remain in deeper
recessions than forecast in January. South Africa is forecast to grow at a 0.6
percent rate in 2016, 0.8 of a percentage point more slowly than the January
forecast.
A significant increase in
private sector credit – fueled by an era of low interest rates and, more
recently, rising financing needs -- raise potential risks for several emerging
market and developing economies, the report finds.
“As advanced economies struggle to gain traction,
most economies in South and East Asia are growing solidly, as are
commodity-importing emerging economies around the world,” said World Bank Chief
Economist and Senior Vice President Kaushik Basu. “However, one development that bears caution is the rapid rise of
private debt in several emerging and developing economies. In the wake of a
borrowing boom, it is not uncommon to find non-performing bank loans, as a
share of gross loans, to quadruple.”
In an environment of
anemic growth, the global economy faces pronounced risks, including a further
slowdown in major emerging markets, sharp changes in financial market
sentiment, stagnation in advanced economies, a longer-than-expected period of
low commodity prices, geopolitical risks in different parts of the world, and
concerns about the effectiveness of monetary policy in spurring stronger
growth. The report introduces a tool to quantify risks to the global outlook
and finds that they are now more tilted to the downside than in January.
“Flagging growth prospects in emerging markets and developing economies would slow or even reverse their progress in catching up to income levels of advanced economies,” said Development Economic Prospects Group Director Ayhan Kose. “However, some commodity-importing emerging and developing economies have been able to register steady or accelerating growth over the last three years.”
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