Sub-Saharan Africa’s economy will accelerate going into next year but could be derailed as the world moves onto an uncertain path that could bring an end to the recent synchronised uptrend, a Reuters poll showed on Monday.
Economists’ views differ starkly about where exactly in the cycle the global economy is and some reckon it is already in a downturn. Africa’s trading partners are a mixed bag, the US has reached almost full employment but Europe is struggling and China is mired in a trade war.
Highlighting the uncertainty, the spread between forecasts was huge. The most pessimistic forecaster for the sub-Saharan Africa region expected growth to slow to 1.3% next year while the most bullish said it would expand 3.5%.
Aly-Khan Satchu, CEO of Rich Management in Nairobi, said the continent’s biggest economies would likely grow softly due to lower Chinese demand for the region’s exports, a consequence of the world’s second biggest economy being involved in a trade war.
Still, the survey median showed economists expect growth next year of 3.1%, in line with a World Bank projection. In 2019 it is estimated to grow 2.5-3.0%.
Nigeria – which clubbed together with South Africa makes around half of sub-Sahara’s regional gross domestic product – is expected to grow 2.1% this year and 2.5% next, much slower than predicted in the previous survey. South Africa is expected to grow 0.6% in 2019 and 1.2% in 2020, almost in line with last month’s consensus.
“South Africa, Angola and Nigeria – will remain a drag on the overall SSA GDP performance during 2019,” said Thea Fourie, senior economist at IHS Markit.
Kenya, East Africa’s biggest economy, is expected to grow 5.7% this year and stretch that by 0.1 percentage point next year while Ghana will probably hit 6.2% this year and 6.0% next year, both better than the continent’s biggest economies.
Nigeria is currently experiencing a sustained period of “stagflation”, characterised by slow economic growth and high inflation and while the poll expects price pressures will ease over the next two years the inflation rate will remain in double digits.
Nigerian inflation is expected to average 11.3% this year, slowing 0.2 percentage points next year and to 10.8% in 2021.
Financial Derivatives Company’s (FDC) research team in Lagos said the Central Bank of Nigeria seems to be leaning towards a combination of options that will keep interest rates high until inflation falls below the upper limit of its 6-9% target.
“However, this looks most unlikely if you consider the full implications of the border closure on prices,” FDC wrote in note.
Nigeria has partially closed its western border with Benin to curb rice smuggling that is threatening the country’s attempt to boost local production. It wants to be self-sufficient in rice but import controls have kept prices high and led to smuggling from Benin into Nigeria.