World Economy

Sub-Sahara Africa Economy to Pick-Up Next Year

Nigeria and South Africa are expected to lift sub-Saharan regional growth next year, a Reuters poll showed, once their central banks cut rates to boost Africa's largest—but sickly—economies.

The two economies contribute more than half of sub-Saharan Africa's gross domestic product and the poll taken in the past three days showed Nigeria's economy, Africa's biggest, will grow 2.4% in 2018, up from 0.8% this year. It has been in recession since late 2015.

"South Africa and Nigeria are the region's largest two economies and, at present, the largest drawback on the sub-Saharan Africa growth performance," said Christie Viljoen, economist at KPMG.

Viljoen added improved growth in these two economies would help SSA accelerate next year. Africa's two biggest economies emerged from recession in the second quarter but strong growth won't return until business confidence is restored.

Nigeria has suffered from dollar shortages and falling commodity prices that have affected the continent's major crude exporters, while South Africa has been dogged by political uncertainty.

Thea Fourie, senior economist at IHS Markit said the synchronized developed market recovery is also expected to support SSA's growth rate into next year.

Still, the World Bank on Wednesday said the economy of sub-Saharan Africa is seen growing more slowly this year than previously forecast, largely due to weak investment and productivity. Fourie added growth is unlikely to reach levels witnessed during the commodity price super cycle, a period in the early 2000's.

She listed stronger foreign direct investment, higher government revenues and more inclusive growth as needed to place the region on a stronger path moving forward.

The survey also suggested Ethiopia and Ghana would lead growth in the region, with Ghana growing 6.6% next year from 6.3% this year, way better than the continent's biggest economies.

Ethiopia's economy is one of the fastest growing in Africa, with the IMF expecting a growth rate of 9% for the 2016/17 fiscal year.

The IMF's earlier outlook for the sub-Sahara region suggests 2017 growth of 2.6%—around a full percentage below that for the world as a whole and less than half the 1999-2008 average of 5.6%.

Africa's major central banks are in an easing cycle to stimulate economies. Ghana is likely to cut the most with rates, currently at 21%, seen ending next year at 17%.

South Africa will probably hold rates after cutting in the first quarter of next year while Nigeria's will probably end next year at 12.25%, down from the current 14%.

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