World Bank projects slow growth for Nigeria, others

World Bank Group

THE International Finance Corporation (IFC), a member of the World Bank Group. Photo: techcabal

INDICATIONS have emerged that Nigeria and some other countries in the Sub-Saharan Africa would experience slow growth this year, going by the recent reports published by the World Bank.

The group, in its latest Global Economic Prospects (GEP) report released at the weekend, said Nigeria, Angola (in Sub-Saharan Africa) and some developing countries across the world would face tough transition in 2015 with higher borrowing and lower prices for oil and other commodities.

Specifically, the World Bank predicts that growth in the region would slow to 4.2 per cent, slower than previously expected.

The report stated: “In Sub-Saharan Africa, low oil prices have considerably reduced growth in commodity-exporting countries (Angola, Nigeria), and have also slowed activity in non-oil sectors.

“Although South Africa is expected to be one of the main beneficiaries of low oil prices, growth is being held back by energy shortages, weak investor confidence amid policy uncertainty, and by the anticipated gradual tightening of monetary and fiscal policy.

“Growth in the region is forecast to slow to 4.2 percent, slower than previously expected. This mainly reflects a reassessment of prospects in Nigeria and Angola following the sharp drop in oil prices, and in South Africa, because of ongoing difficulties in electricity supply.

“For 2016-17, growth is expected to be only marginally higher as these challenges partially offset stronger trading partner growth and the continued expansion in the region’s low-income countries,” it stated.

World Bank Group President, Jim Yong Kim, said: “Developing countries were an engine of global growth following the financial crisis, but now they face a more difficult economic environment. We’ll do all we can to help low- and middle-income countries become more resilient so that they can manage this transition as securely as possible.

“We believe that countries that invest in people’s education and health, improve the business environment, and create jobs through upgrades in infrastructure will emerge much stronger in the years ahead. These kinds of investments will help hundreds of millions of people lift themselves out of poverty,” he said.

Other developing countries are however projected to grow by 4.4 percent this year, with a likely rise to 5.2 percent in 2016, and 5.4 percent in 2017.

With an expected liftoff in United States (U.S.) interest rates, the report said borrowing will become more expensive for emerging and developing economies over the coming months. This process is therefore expected to unfold relatively smoothly since the U.S. economic recovery is continuing and interest rates remain low in other major global economies.

However, there are considerable risks around this expectation, the report argues. Just as the initial announcement of U.S. policy normalization caused turmoil in financial markets in 2013 – now referred to as the “taper tantrum” – the U.S. Federal Reserve’s first interest rate increase, or liftoff, since the global financial crisis could ignite market volatility and reduce capital flows to emerging markets by up to 1.8 percentage points of GDP, the report says.

World Bank Chief Economist and Senior Vice President, Kaushik Basu, said: “Slowly but surely the ground beneath the global economy is shifting. China has avoided the potholes skillfully for now and is easing to a growth rate of 7.1 percent; Brazil, with its corruption scandal making news, has been less lucky, dipping into negative growth. With an expected growth of 7.5percent this year, India is, for the first time, leading the World Bank’s growth chart of major economies. The main shadow over this moving landscape is of the eventual U.S.liftoff.

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