According to the International Monetary Fund, sub-Saharan Africa is among the fastest-growing economies in 2019, which is a repeat of its ranking in 2018. This position the region holds with an overall economic growth of 3.8 percent, in line with the global forecast of 3.7 percent.
In the top 10 category, Ethiopia leads, again. This country is followed by Rwanda, Ghana, Ivory Coast, Senegal Benin Republic, Kenya, Uganda and Burkina Faso. Hopefully, Tanzania will join the fast company in the region this year to replace Guinea.
The reported growth has been made possible by the stable rebound of commodity prices.
While the improved economy and enhanced access to capital market are also factors contributing to the improvement, the dip of commodity prices in 2014 to 2015 has been cited as one of the key drivers for the growth.
Sub-Saharan Africa has higher growth potential, but the continent’s largest economies – Nigeria and South Africa – has had underwhelming projections to undermine such prospects. These nations have been in the thick of things facing a boisterous 2018. Both nations also have presidential elections this year, which further dents the region’s growth.
Nigeria is projected to expand by 2.3 percent this year, from its 1.9 percent in 2018. South Africa on the other hand, will register an expansion of 1.4 percent, up from its 2018 0.8 percent. According to Foresight Africa report by Washington DC-based think tank Brookings, this kind of growth does not look so good up against 2.5 percent annual population growth.
Africa’s population accounts for about half of the world’s fastest-growing economies, with 20 in the continent expanding at a 5 percent average or higher over the next five years. According to Brahima Coulibaly, director of Brookings’ Africa Growth Initiative, the projection is faster than 3.6 percent rate for the global economy.
Despite these promising figures and seemingly rampant decimals, the rising debt will be a burden on Africa’s potential to grow its economy.
While there is a possibility of a 2020 recession, the commodity prices will slump following demand drop. Should this get any worse, several African countries would find it hard to service their debts, especially if interest rates never stop rising.
Brookings reports that no less than 14 countries are either in debt stress or at high risk of debt distress, up from six countries from just five years ago. These countries currently have a cumulative debt of around USD 160 Bn, of which USD 90 Bn is external debt. The average debt GDP, in 2017, rose to 57 percent in some countries and has now hit extremes in Cape Verde, Eritrea, Congo, Brazzaville and Mozambique where the story is more than 100 percent of GDP.
The growing debt in the continent, IMF says, is a ticking time bomb that should be a wake-up call for the African policymakers in 2019 to strengthen governance around tax revenue collection to raise funds to service the loans.