Home Business Low commodity prices impeding Africa’s growth -World Bank

Low commodity prices impeding Africa’s growth -World Bank

LAGOS (Sundiata Post) – The World Bank has revealed that the plunge in commodity prices – particularly oil, which fell 67 percent from June 2014 to December 2015 – and weak global growth, especially in emerging market economies, are behind the region’s performance.  However, the adverse impact of lower commodity prices is compounded by domestic conditions such as electricity shortages, policy uncertainty, drought, and security threats, which stymied growth.
Economic activity in Sub-Saharan Africa slowed in 2015, with GDP growth averaging 3.0 percent, down from 4.5 percent in 2014. This has led to a deceleration in the pace of expansion which was last seen in 2009. These figures are outlined in Africa’s Pulse, the World Bank’s twice-yearly analysis of economic trends and latest data for the region.
The 2016 growth forecast remains subdued at 3.3 percent, way below the robust 6.8 percent growth in GDP that the region sustained in the 2003-2008 period. Overall, growth is projected to pick up in 2017-2018 to 4.5 percent.
“As countries adjust to a more challenging global environment, stronger efforts to increase domestic resource mobilisation will be needed. With the trend of falling commodity prices, particularly oil and gas, it is time to accelerate all reforms that will unleash the growth potential of Africa and provide affordable electricity for the African people,” says Makhtar Diop, World Bank Vice President for Africa said in a statement made available to Sundiata Post.
Several countries are expected to see moderate growth. Among frontier markets, growth is expected to edge up in Ghana, driven by improving investor sentiment, the launch of new oilfields, and the easing of the electricity crisis. In Kenya, growth is expected to remain robust, supported by private consumption and public infrastructure investment.
The projected pickup in activity in 2017-2018 reflects a gradual improvement in the region’s largest economies – Angola, Nigeria, and South Africa – as commodity prices stabilize and growth-enhancing reforms are implemented.
As Africa undergoes rapid urban growth, there is a window of opportunity to harness the potential of cities as engines of economic growth. The rapid decline in oil and commodity prices has adversely affected resource-rich countries and signaled an urgent need for economic diversification in Africa. Urbanisation and well managed cities provide a major opportunity to offer a springboard for diversification.
The growth of cities, when well-managed, can spur economic growth and productivity. But African cities are currently not delivering agglomeration economies or reaping urban productivity benefits. Instead they suffer from high housing and transport costs, in addition to the high cost of food that takes up a large share of urban household budgets.
Housing and transport are particularly costly in urban Africa. Housing prices are about 55 percent higher in urban areas of African countries relative to their income levels. Urban transport, which includes prices of vehicles and transport services, is about 42 per cent more expensive in African cities than cities in other countries. Like households and workers, firms also face high urban costs. Cross-country analysis confirms that manufacturing firms in African cities pay higher wages in nominal terms than urban firms in other countries at comparable development levels.
“To build cities that work–cities that are livable, connected, and affordable, and therefore economically dense–policy makers will need to direct attention toward the deeper structural problems that misallocate land, fragment development, and limit productivity,” the World Bank said in a statement.
Commodity price drops have lowered Africa’s terms of trade in 2016 by an estimated 16 percent, with commodity exporters seeing large terms-of-trade losses. Across the region in 2016, the impact of this shock is expected to lower economic activity by 0.5 percent from the baseline, and to weaken the current account and fiscal balance by about 4 and 2 percentage points below the baseline, respectively.
Sub-Saharan Africa countries is believed to face low and volatile prices in global commodity markets. “Governments must take steps to adjust to a new, lower level of commodity prices, address economic vulnerabilities, and develop new sources of sustainable, inclusive growth. Africa’s growing urban centers offer a springboard for diversification. But they need better institutions for effective planning and coordination that can raise urban economic density and productivity, and spur the region’s transformation,” the statement added.
Previous articleBayelsa seals Shell facility without building permit
Next articleFRSC insists it has statutory powers to arrest traffic offenders, impound vehicles

Leave a Reply