World Bank: Kenya set to lead Africa in growth over 15 years
The Standard Gauge Railway under construction. Kenya’s economic growth could be the highest in Sub-Saharan Africa over the next 15 years, according to a new World Bank report. PHOTO | KEVIN ODIT | NATION MEDIA GROUP
Kenya’s economic growth could be the highest in Sub-Saharan Africa over the next 15 years, according to a new World Bank report.
The bank’s Pulse report on the African economy said that Kenya’s growth should remain “robust” at around 6.2 per cent until 2030, well above that of many other African economies that will suffer from China’s economic slowdown and restructuring away from foreign investment and towards domestic consumption.
Over the next three years, however, Tanzania and Rwanda are likely to witness even higher growth, at over seven per cent of GDP, along with Cote d’Ivoire, Mozambique and Ethiopia.
Their growth will be spurred by investments in energy and transport, consumer spending and investment in natural resources.
The bank has also warned of dark clouds on the horizon, including widening public sector deficits, growing debt levels and the continuing decline in commodity prices, particularly for coffee, which has declined by 25 per cent in the past year.
Kenya’s public debt remains around 40 per cent of GDP and the country has a current account deficit of about 10 per cent of GDP.
Overall, the Pulse report predicts that most Sub-Saharan countries will grow at a slower pace “due to a more challenging economic environment”. It predicts that growth will slow down in 2015 to 3.7 per cent from 4.6 per cent in 2014, reaching the lowest growth rate since 2009.
PRICE OF OIL
The 2015 forecast remains below the robust 6.5 per cent growth in GDP, which the region sustained between 2003 and 2008, and even below the 4.5 per cent growth following the global financial crisis of 2009 to 2014. Overall, growth in the region is projected to pick up to 4.4 per cent in 2016, and strengthen to 4.8 per cent a year later.
Sharp drops in the price of oil and other commodities have brought on the recent weakness in growth.
Africa’s Pulse found that progress in reducing income poverty in Sub-Saharan Africa has been occurring faster than previously thought. According to World Bank estimates, poverty in Africa declined from 56 per cent of the population in 1990 to 43 per cent in 2012.
At the same time, Africa’s population recorded progress in all dimensions of well-being, particularly in health (maternal mortality, under-five mortality) and primary school enrolment, where the gender gap shrank.
However, the bank warned that African countries “continue to face a stubbornly high birth rate, which has limited the impact of the past two decades of sustained economic growth on reducing the overall number of the poor.”
Other problems centre on fiscal deficits across the region, which the World Bank says “are now larger than they were at the onset of the global financial crisis.”
Rising wage bills and lower revenues, especially among oil-producers, led to a widening of fiscal deficits. In some countries, the deficit was driven by large infrastructure expenditures.
The result has been that government debt has continued to rise in many countries.
“While debt-to-GDP ratios appear to be manageable in most countries, a few countries are seeing a worrisome jump,” says the report.
“The dramatic, ongoing drop in commodity prices has put pressure on rising fiscal deficits, adding to the challenge in countries with depleted policy buffers,” said Punam Chuhan-Pole, the acting chief economist for World Bank Africa and the report’s author.
“To withstand new shocks, governments in the region should improve the efficiency of public expenditures, such as prioritising key investments, and strengthening tax administration to create fiscal space in their budgets.”
The report warns that future growth across the region “will be repeatedly tested as new shocks occur in the global economic environment,” underscoring the need for governments to embark on structural reforms to alleviate domestic impediments to growth.
Source: Daily Nation