The World Bank’s Global Economic Report for June 2013 shows a positive outlook for Sub-Saharan Africa because growth has remained robust due to resilient domestic demand and still relatively high commodity prices. These factors, along with projected strengthening of external demand, are expected to underpin a pick-up of growth over the 2013-2015 period to about 5.2% p.a. Excluding, South Africa, growth in the region will average some 6.2% p.a..
Much of this growth occurred thanks to investments in both the resource and non-resource sectors. In 2013, net foreign direct investment inflows to SSA are expected to reach about $40 billion, up from $32 billion in 2012. Increasing growth has not come only from the resource sector, investments (both domestic and foreign) have flourished in the non-resource sector, in particular the service sub-sectors. For example, In Tanzania, one of our focus countries, transport and communications and retail are some of the fastest growing sub-sectors.
Although some variations between countries in the region, better weather leading to improved harvests, decelerating inflation, relaxation of earlier interest rate hikes and increased remittance inflows (USD 33bn in 2013, up from USD 32bn in 2012) broadly supported the resilience in household spending. Fiscal policy for most economies remains expansive with several governments rightly emphasising the need to address infrastructural weaknesses. However, compared to 2008 levels, fiscal buffers in the region are yet to be restored, and in a number of countries the expansionary fiscal policy may actually be hitting against capacity constraints.
Risks cited by the World Bank include a weaker than expected recovery in high-income countries, a sharper than expected decline in commodity prices, overheating in economies operating close to capacity; adverse weather conditions and political unrest.