Significant deterioration in high-income economies could downgrade Africa’s growth – World Bank

Growth acceleration in Africa forecasted to reach 4.8% in 2011, 5.2% and 5.5% in 2012 and 2013 respectively may be encountering some difficulties due to recent troubles in the global economy especially in high-income countries, the World Bank warns.

The continent attained an economic growth of 4.6% in 2010.

The just-released Volume 4 of the World Bank’s report titled “Africa’s Pulse” indicates that recent economic developments are however expected to reduce the growth momentum in the region and shave-off between 0.1% and 0.2% of GDP growth in the region.

“If the situation in high-income economies deteriorates significantly beyond what is currently envisaged in the baseline scenario, growth in African countries could be significantly downgraded, beyond the current moderate slowdown,” said the report.

The World Bank earlier forecasted 5.1% growth at the end of 2011 for Africa but has cut it down to 4.8% based on “no further significant downward spiral in the global economy.”

Using a downside risk scenario where growth in Europe slows down by a percentage point below earlier forecast (i.e. from 1.7% to 0.7%), the Bank said “we estimate that GDP growth in Sub-Saharan Africa could slow down by a further 0.8%, thus dipping to 4%.”

The report adds that African countries this time around will be more constrained in their policy options mainly because “they (appropriately) undertook expansionary fiscal policies to offset the contractionary impact of the 2008-9 global crisis, they have less fiscal space than they had in 2008.”

It cited Ghana and Ethiopia for tightened fiscal policies with less fiscal space and moderate risk of debt distress.

By Ekow Quandzie