Countries within Sub-Saharan Africa (SSA) are at risk of sustaining further public debts, as their level of indebtedness continues to rise. This is a caution by World Bank’s Chief Economist for Africa, Albert Zeufack.
Speaking at the launch of the 18th edition of the ‘Africa Pulse bi-annual report’ on the state of African economies by the World Bank, Zeufack explained that, “the vulnerability to weaker currencies and rising interest rates associated with the changing composition of debt may put the region’s public debt sustainability at further risk.”
“Other domestic risks include fiscal slippage, conflicts, and weather shocks. Consequently, policies and reforms are needed that can strengthen resilience to risks and raise medium-term potential growth,” Zeufack noted.
According to the October 2018 issue of Africa Pulse, SSA economies are still recovering from the slowdown in 2015/2016, but growth is slower than expected. The average growth rate in the region is estimated at 2.7 percent in 2018, which represents a slight increase from 2.3 percent in 2017.
The slower pace of the recovery in SSA, 0.4 percentage points lower than the April forecast, is explained by the sluggish expansion in the region’s three largest economies – Nigeria, Angola, and South Africa. Lower oil production in Angola and Nigeria offset higher oil prices, and in South Africa, weak household consumption growth was compounded by a contraction in agriculture.
“The region’s economic recovery is in progress but at a slower pace than expected,” said the Chief Economist. “To accelerate and sustain an inclusive growth momentum, policy makers must continue to focus on investments that foster human capital, reduce resource misallocation and boost productivity. Policymakers in the region must equip themselves to manage new risks arising from changes in the composition of capital flows and debt,” he admonished.
Zeufack also noted that the slow growth is partially a reflection of a less favourable external environment for the region.
Global trade and industrial activity lost momentum, as metals and agricultural prices fell due to concerns about trade tariffs and weakening demand prospects. While oil prices are likely to be on an upward trend into 2019, metal prices may remain subdued amid muted demand, particularly in China.
The reports identified that financial market pressures intensified in some emerging markets and concern about their dollar-denominated debt has risen amid a stronger US dollar.
By Joshua W. Amlanu