Countries in the sub-Saharan African region, including Nigeria, is expected to record an economic growth of 3.8 per cent this year, buoyed by stable prices that have spurred easing by policymakers.
This is according to a Bretton Woods institution, the World Bank Group, which upgraded is Gross Domestic Product (GDP) growth forecasts for Ethiopia, Nigeria, and the Ivory Coast, all major economies in the region. It said real incomes are also growing at a faster rate this year and into the next two years.
Recall that the Central Bank of Nigeria (CBN) eased interest rates from 27.5 per cent to 27 per cent last month.
“While this marks a gradual recovery from a decade of successive shocks, the rebound has yet to gain strong momentum,” the World Bank said in the report.
The upgrade from 3.5 per cent in April was driven by stabilising foreign exchange and inflation rates in countries like Ethiopia, giving room for interest rate cuts, the bank said in its biannual Africa Pulse report.
Growth prospects for 30 economies out of the 47 that make up the region, as defined by the bank, were revised upwards. It noted that growth will accelerate to an annual average of 4.4 per cent in the next two years, the bank said, slightly up from an initial forecast of 4.3 per cent.
“These favourable conditions are fuelling a recovery in private consumption and investment,” the bank said in the report. However, fiscal consolidation efforts could curb the pace of recovery in some economies, the report warned.
“The median inflation is less than 4%. Moreover, most of the currencies that were cratering relative to the U.S. dollar have now recovered and are stable,” Mr Andrew Dabalen, chief economist for Africa at the World Bank said as per Reuters.
However, the regional economic outlook faces risks from trade uncertainty sparked by the policies of US President Donald Trump, high debt burdens, and the need to create jobs for millions of young people coming into the job market.
“Trade challenges remain very high. We don’t know how this is going to be resolved because there are lots of negotiations going on,” Mr Dabalen said, citing the expiry of AGOA, a key trade agreement between the United States and African nations.
The World Bank urged governments to focus on the creation of good jobs by improving the general business environment, and nurturing small and mid-sized firms.
“These jobs have to be jobs that provide a living wage and secure lives,” Dabalen said, adding that three-quarters of the jobs created in the region’s economies are in the informal sector.
Lack of employment opportunities and other grievances have led to youth-led protests in Kenya, Nigeria, and Madagascar since last year, showing the scale of the challenge for policymakers.
“The consequences of not solving these problems are hard to contemplate. They will be very disruptive, and I think we’re beginning to see the signs of it,” Mr Dabalen said.