Weakening Growth in Sub-Saharan Africa Calls for Policy Reset

Growth lowest in 15 years, with significant variation across region

Severe shocks: weak commodity prices, tight external financing, drought

Urgent need to reset policies to secure growth

The steep decline in commodity prices and tighter financing conditions have put many large economies under severe strain, and the new report calls for a stronger policy response to counter the effect of these shocks and secure the region’s growth potential.

The report shows growth fell to 3½ percent in 2015, the lowest level in 15 years. Growth this year is expected to slow further to 3 percent, well below the 6 percent average over the last decade, and barely above population growth.

Hit by several shocks

The commodity price slump has hit many of the largest sub-Saharan African economies hard. While oil prices have recovered somewhat compared to the beginning of the year, they are still more than 60 percent below 2013 peak levels—a shock of unprecedented magnitude (see Chart 1).

As a result, oil exporters such as Nigeria, Angola, and five of the six countries within the Central African Economic and Monetary Community continue to face particularly difficult economic conditions. The decline in commodity prices has also hurt non-energy commodity exporters, such as Ghana, South Africa, and Zambia.

Compounding this shock, external financing conditions for most of the region’s frontier markets have tightened substantially compared to the period until mid-2014 when they enjoyed wide access to global capital markets.

In addition, a severe drought in several southern and eastern African countries, including Ethiopia, Malawi, and Zimbabwe, is putting millions of people at risk of food insecurity.

Medium-term prospects still favorable

However, the impact of these shocks varies significantly across the region and many countries continue to register robust growth, including in per capita terms (see Chart 2).

In particular, most oil importers are faring much better with growth of 5 percent or higher in countries such as Côte d’Ivoire, Kenya, Senegal, and many low-income countries. These countries continue to benefit from infrastructure investment efforts and strong private consumption.

While the immediate outlook for many sub-Saharan African countries remains difficult, the region’s medium-term growth prospects are still favorable. The underlying domestic drivers of growth at play over the last decade generally continue to be in place. In...