JOHANNESBURG – Investor confidence in Africa won’t improve this year as weak prices hit the largest oil exporters, although crude importers will benefit, a Reuters poll found on Thursday.
Growth in net oil exporters Nigeria and Ghana will be weaker than last year, coming in at 5.0 and 4.2 percent respectively, knocked by crude prices which have tumbled around percent in just seven months.
While such growth rates are still high by global standards, the forecasts are weaker than in the boom years that were driven by China’s voracious appetite for commodities.
“The largest regional economies will suffer negative headlines this year,” said Richard Hamilton of Business Monitor International in London.
“East Africa will be the standout region, in large part thanks to lower oil prices, but this won’t be enough to offset bad news out of Nigeria and South Africa.”
Growth forecasts for Nigeria and Ghana were revised down from previous polls. The latest forecasts were collected in the last week.
Authorities in Nigeria expect half a percentage point more growth than the poll median but that is still less than the 6.23 percent 2014 estimate. Ghana’s economy is estimated to have grown 4.1 percent in 2014.
The poll predicts Kenya, east Africa’s largest economy, will grow 5.9 percent this year, compared with an estimate for 2014 of 5.3 percent, as consumers benefit from lower energy costs.
The Treasury expects the economy to expand 6.9 percent.
Analysts said Kenyan growth and inflation would benefit more from the oil price plunge than from the impact of quantitative easing in the euro zone, its biggest trading partner.
South Africa, the continent’s second-largest economy, has like Nigeria been hampered by electricity constraints. It is expected to grow a relatively paltry 2.5 percent this year.
Still, the big two economies are expected to raise interest rates this year as inflation remains high and in anticipation of the United States hiking rates for the first time since 2006.
Nigerian prices are forecast to rise 9.0 percent this year after a 5 percent fall in the currency since Jan. 1 made imports more expensive. In Ghana they will soar 13.5 percent but Kenyan inflation is pegged at a more modest 5.5 percent.
Oil makes West Africa budgets slip
In November, Nigeria lowered its 2015 spending plan to 4.3 trillion naira ($22 billion), based on a benchmark oil price of $65 a barrel, down from $77.5 in the 2014 budget.
But Thalma Corbett from NKC Independent Economists said the authorities need to reduce the oil benchmark assumption further and also tighten monetary policy more if needed.
The latest Reuters survey on oil prices suggest crude is likely to average $58.30 per barrel this year, down $15.70 from last month’s poll, the biggest month-on-month forecast revision since last financial crisis collapse.
Ghana’s government is also reviewing its 2015 budget estimates given a fall in the oil prices, which could have a negative impact on the current account balance and foreign exchange reserves.