Growth in Sub-Saharan Africa looks poised to remain buoyant by historic standards, maintaining a growth pace near 6 percent from 2007 through 2009, notwithstanding slowing demand in the United States and the Euro Area.
GDP continued to grow strongly in 2007, with output expanding 5 percent in the first half of the year, and is expected to amount to 6.1 percent for 2007 as a whole. This follows a solid 5.7 percent advance in 2006, grounded in sharp gains for regional oil exporters and South Africa.
Global commodity demand and prices were pushed higher in recent years, notably by continued brisk economic expansion in China.
Sub-Saharan Africa is one of few regions that has witnessed a strong supply response to higher oil prices, with crude oil production up 14.3 percent in 2004, an additional 7.6 percent in 2005, and 8.1 percent in 2006 (when Nigeria, which suffered from a number of shutdowns of facilities, is excluded).
Improved macroeconomic stability is also playing an important role in sustaining growth, as is a pickup in both domestic and foreign investment.
Debt relief in recent years has freed budgetary resources for spending on infrastructure and social programs.
A common trait across economies is a notable pickup in capital spending focused on the transport, telecommunications, and construction sectors.
In addition, recovery from drought in many areas of the region is translating into improved performance in agriculture, adding impetus to growth, while the income effects stemming from several years of high non-oil commodity prices are stimulating private consumption.
Recent turbulence in international financial markets resulted in a moderate depreciation of the South African rand against the dollar, but this followed a period of appreciation of the rand because of anticipated capital inflows related to merger and acquisition activity.
Due to weakness in the U.S. dollar, the nominal effective exchange rate of the rand has returned to levels prevailing in July, declining 11.2 percent during the first 10 months of the year. There are as yet no signs of a sharp sell-off of South African assets, and there appears to be little evidence of marked adverse effects on the domestic growth outlook.
Much of the impetus for regional growth over 2008–09 will come from strong domestic demand, notwithstanding softer private demand in South Africa, the region’s powerhouse, where higher interest rates and an erosion of real incomes are curbing real outlays.
A sharp decline in farmers’ income in countries affected by recent floods will constitute a near-term drag on growth, and on private consumption in particular, although government and donor transfers and assistance may mitigate some of the effects.
Investment is expected to remain strong, notwithstanding the tightening of international credit conditions and lower commodity prices, in part because of large strategic investments by rapidly growing developing economies such as China and India.
A notable activity is the Moatize coal project in Mozambique, investment in which amounted to $1.44 billion in the first half of 2007. Madagascar is also experiencing huge investments in its economy.
Against this background, Sub-Saharan African GDP is anticipated to be sustained at a pace above 6 percent through 2008, before slipping to 5.8 percent growth in 2009 as oil exporters respond to international conditions and restrain output moderately.
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