Sub-Saharan Africa’s biggest economies will benefit from a global upswing this year – as long as the U.S.-China tariff dispute does not disturb improving global trade flows, a Reuters poll found on Wednesday.
The poll taken in the past week showed economic growth forecasts for South Africa, the continent’s most industrialised nation, have got an unusually strong nudge up.
In January, economists projected growth this year at 1.3 percent but expectations have improved each month. The rate is now put at 1.9 percent, buoyed by an improving services industry and supported by renewed political stability since Cyril Ramaphosa replaced the scandal-plagued Jacob Zuma as South African president.
In Nigeria, Africa’s biggest economy, forecasts were lifted to 2.6 percent for this year, compared with 2.4 percent at the beginning of 2018.
“Sub-Saharan Africa’s economic growth remains on track for a solid recovery this year,” Absa Capital wrote in a note.
Absa Capital said the strengthening global economy, higher commodity prices and improving weather conditions supported growth, with the primary sector standing out as the main growth driver in many economies.
Still, John Ashbourne of Capital Economics said African economies are struggling to move workers out of low-productivity sectors, primarily agriculture, and into more productive industries. “If this cannot be done, then the region’s surging population will be more of a burden than a boon,” Ashbourne said.
Kenya’s economy, largely focused on agriculture, is still expected to grow 5.5 percent this year, the same as in January.
Ghana, will probably be one of Africa’s fastest growing economies at 7.8 percent this year, the poll predicted. This is up from 7.0 percent in January.
But a back-and-forth dispute between the United States and China, the world’s two biggest economies, on trade has triggered market jitters over what is an otherwise brighter economic and political outlook for Africa.
The poll found 17 of 23 economists thought the impact of the trade dispute would be damaging for major African economies this year.
All but one of 20 economists said Nigeria’s decision not to sign the African Continental Free Trade agreement (AfCFTA) was a blow to the region’s trade future but most thought Abuja would sign up in a few years.
Other African leaders agreed to form a trading zone encompassing 1.2 billion people, but Nigeria was among 11 countries not signing up. South Africa indicated it supported the agreement but has some technicalities to fulfil first.
Interest rates in the continent’s major economies had been poised to ease this year and South Africa cut its repo rate by 25 basis points in March. However, the rate is now expected to stay at 6.50 percent until next year.
A poll last month indicated Nigeria will follow Ghana’s lead and cut rates in the third quarter. Kenya surprised markets by lowering rates last month by 50 basis points to 9.50 percent, its first cut since September 2016.