“Improved growth in Nigeria and South Africa economies would help sub-Saharan Africa accelerate next year” says Christie Viljoen, economist at KPMG.
Africa’s two biggest economies that contribute more than half of sub-Saharan Africa’s gross domestic product are expected to boost sub-Saharan regional growth by next year after their central banks cut rates to boost the economies.
Nigeria 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, lugging both economies into recession. However, both economies emerged from recession in the second quarter but strong growth will not return until business confidence is restored.
A Reuters poll showed, Nigeria’s economy, Africa’s biggest, will grow 2.4% in 2018, up from 0.8% this year while South Africa, the continent’s most industrialized economy, is expected to grow 1.2% in 2018 compared to 0.7% this year, though there is the probability that both countries will wait until January of March to cut interest rates by 25 basis points to 6.50% in South Africa and by the same margin to 13.75% in Nigeria.
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.
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 14.0 %.
A senior economist at IHS Markit, Thea Fourie, said “the synchronized developed market recovery is also expected to support sub-Saharan Africa’s growth rate into next year, adding that growth is unlikely to reach levels witnessed during the commodity price super cycle, a period in the early 2000‘s”. Stronger foreign direct investment, higher government revenues and more inclusive growth are needed to place the region on a stronger path moving forward Fourie said.