Of oil prices policy
“We need to see governments in the region stop wasting funds and instead boost productivity to support the region’s economic recovery. High public debt in some countries in the region, combined with weakening currencies and rising interest rates, could endanger their ability to service those debts. Policymakers in the region must equip themselves to manage new risks arising from changes in the composition of capital flows and debt,” Mr Zeufack said.
The World Bank economists are also calling on African central banks to prioritise the management of currency risks amid rising foreign currency-denominated debt.
“Policies should foster the development of local currency debt markets to reduce currency risks and mismatches. Financial openness would attract all types of capital inflows, suggesting that a priority for sub-Saharan Africa would be to develop domestic financial markets. Fostering the development of local currency bond markets in sub-Saharan Africa would also require a stable macroeconomic environment,” Mr Calderon said.
The report came as the continent's economic growth for the year was revised downward to 2.7 per cent, down from the June forecast of 3.1 per cent, even though the East African countries are expected to fare better than their sub-Saharan counterparts.
The bank says the external environment is less favourable amid mounting global trade risks and weakening demand for the Africa’s products, as the main reasons for the dampened outlook.
“Political uncertainty and the weakening of economic reforms will continue to weigh on the economic outlook in many countries in the region,” it says.
The slower pace of the recovery in sub-Saharan Africa (0.4 percentage points lower than the April forecast) is explained by the sluggish expansion in the region’s three largest economies, Nigeria, Angola, and South Africa.
Lower oil production in Angola and Nigeria offset higher oil prices, and in South Africa, weak household consumption growth was compounded by a contraction in agriculture.
“Growth in the region — excluding Angola, Nigeria and South Africa — was steady. Several oil exporters in Central Africa were helped by higher oil prices and an increase in oil production. Economic activity remained solid in the fast-growing non-resource-rich countries, such as Côte d’Ivoire, Kenya, and Rwanda, supported by agricultural production and services on the production side, and household consumption and public investment on the demand side,” the reports says.
“The road ahead is bumpy. The tightness of oil supply suggests that oil prices are likely to remain elevated through the rest of the year and into 2019. Metals prices have been lower than previously forecast and may remain subdued in 2019 and 2020 amid muted demand, particularly in China,” the report adds.