 Economic growth in Sub-Saharan Africa is projected to recover to 2.6 percent in 2017, following a marked deceleration in 2016. The upturn in economic activity is expected to continue in 2018-19, reflecting improvements in commodity prices, a pickup in global growth, and more supportive domestic conditions.
The pace of the recovery is weak, however, as the region's three largest economies-Angola, Nigeria, and South Africa-are projected to post only a modest rebound in growth following a sharp slowdown in 2016. Investment growth will recover only gradually, amid tight foreign exchange liquidity conditions in major oil exporters and low investor confidence in South Africa. Growth will be limited in several metals exporters, as well as in oil exporters in the Central African Economic and Monetary Community, as these countries embark on fiscal adjustment to stabilize their economies. Among non-resource intensive countries, such as Ethiopia, Senegal, and Tanzania, growth is expected to remain generally solid, supported by domestic demand. Regional growth remains insufficient to raise per capita incomes. Per capita gross domestic product () is projected to contract by 0.1 percent in 2017, before rising moderately (by less than 1.0 percent a year) in 2018-19. With still high poverty rates, the region is faced with the urgent need to regain the momentum in growth and make it more inclusive. This will require deep reforms to improve institutions for private sector growth, develop local capital markets, improve the quantity and quality of public infrastructure, enhance the efficiency of utilities, and strengthen domestic resource mobilization. Public debt levels are rising in the region. In an environment of gradual normalization of monetary policies in advanced economies, many African countries face the challenge of undertaking much-needed development spending without jeopardizing hard-won debt sustainability. Downside risks to the regional outlook include, externally, stronger than expected tightening of global financing conditions, weaker improvements in commodity prices, and the threat of protectionism rising from populist sentiment, and, domestically, slippage on reforms, increasing security threats, and political uncertainty ahead of elections in some countries. The special topic of this report is infrastructure. Sub-Saharan Africa lags other developing regions in virtually all dimensions of infrastructure performance, although trends vary across key sectors. Progress has been inadequate in the power sector, where electricity-generating capacity per capita has changed little over 20 years, and although access to electricity more than doubled during 1990-2014, only 35 percent of the population has access. Sub-Saharan Africa also has the lowest road and railroad densities among developing regions, and road density declined during 1990-2011. By contrast, telecommunications infrastructure has improved dramatically: the number of fixed and mobile phone lines per 1,000 people increased from three in 1990 to 736 in 2014, and the number of Internet users per 100 people increased from 1.3 in 2005 to 16.7 in 2015. Access to safe water has also risen, from 51 percent of the population in 1990 to 77 percent in 2015. The growth benefits of closing Sub-Saharan Africa's infrastructure quantity and quality gaps are potentially large. Catching up to the median of the rest of the developing world would increase growth in per capita by 1.7 percentage points per year, and closing the gap relative to the best performers would lift this growth by 2.6 percentage points per year. Closing the gap in electricity-generating capacity yields the largest potential benefit, and substantial gains also arise from narrowing the gap in the length of the road network. Public capital spending levels are too low to address the region's infrastructure needs. According to data collected by the BOOST initiative for 24 countries in Sub-Saharan Africa, annual public spending on infrastructure was 2 percent of in 2009-15. Two-thirds of total capital spending was on roads and about one-sixth each on electricity and water supply and sanitation. Interest is growing in crowding-in private investment in infrastructure, but public-private partnerships remain a small market in Sub-Saharan Africa. Four countries (South Africa, Nigeria, Kenya, and Uganda) account for 48 percent of the public-private partnership infrastructure projects in the region in the past 25 years. The energy sector, especially renewables, is attracting an increasing share of these projects. A robust institutional and regulatory framework is critical in attracting private investment for infrastructure projects. Evidence shows that Sub-Saharan Africa performs below the global average in the regulatory frameworks for procurement in public-private partnerships, especially in project preparation. The impact of public investment on growth can be enhanced by implementing policies that foster the efficiency of public investment. For instance, improving the institutions and procedures governing project appraisal, selection, and monitoring can render considerable economic dividends. Evidence suggests that countries with sound public investment management systems tend to have lower but more efficient levels of public investment, crowd in more private investment, and exhibit higher growth rates. |