World Bank has lowered its 2016 growth forecast for Africa to 3.3%, from 4.2% previously, after the continent expanded by only 3% in 2015; the slowest pace of growth since the 2009 global financial crisis and well below the 6.8% levels experienced by the continent between 2003 and 2008.
The bank’s latest Africa’s Pulse publication, released on Monday, indicated that the weak 2015 performance, as well as the 2016 downward revision, could be attributed largely to the plunge in commodity prices, which had dramatically lowered the terms of trade for the continent’s oil and minerals exporters.
“The fall in commodity prices represented a significant shock for the region, because of the large share of commodities in exports: fuels, ores and metals account for more than 60% of the region’s exports compared with 16% for manufactured goods and 10% for agricultural products,” the bank outlined.
Commodity price drops would also lower Africa’s terms of trade in 2016 by an estimated 16% and the “impact of this shock is expected to lower economic activity by 0.5% from the baseline, and to weaken the current account and fiscal balance by about 4 and 2 percentage points below the baseline, respectively”.
Growth expectations for 2017 had also been reined in to 4.5%, from 4.7% previously, and the bank argued that commodity exporters across the region would need to adjust to a “new, lower level of commodity prices”.
“Furthermore, with commodity markets, and external conditions more generally, likely to be less supportive than in the past, the region will also need to focus on developing new sources of growth.”(source: Miningweekly)