FILE PHOTO: Workers arrange bags containing cocoa beans at a cocoa processing factory in Ile-Oluji village in Ondo state, southwest Nigeria

Sub-Saharan Africa to stay on recovery path, rate cuts on the horizon

By Vuyani Ndaba

JOHANNESBURG (Reuters) - Sub-Saharan Africa will stay on its recovery path next year provided heavyweight economies punch better, a Reuters poll found, but it will still grow below potential for a part of the world with a growing population.

A poll of 15 analysts and economists taken this week showed Nigeria, Africa's biggest economy, would grow 2.6% next year and Kenya would grow 5.8%. In both cases this is 0.2 percentage points slower than thought in April.

"Growth should gain slightly more traction next year, supported by a tendency towards looser monetary policy which will support consumption," said Cobus De Hart, chief economist for north and west African countries at NKC African Economics.

Nigerian economic growth accelerated but Kenya's slowed in the first quarter of the year compared to the same time last year.

However, even if Ghana's growth slows as expected to 6.1% in 2020 from 6.5% this year, next year's performance would still be faster than the 6.0% predicted in the last survey.

Interest rates - in Ghana at 16%, Nigeria at 13.5% and Kenya at 9% - are expected to be left unchanged next week, although Nigeria will probably ease in September and the other two next year. Other major global central banks look set to ease policy soon.

Economists largely agreed Sub-Saharan Africa's growth - which the International Monetary Fund forecast in April would grow at 3.5% this year - would stay on the recovery path next year.

South Africa's Reserve Bank joined other emerging market banks in cutting interest rates on Thursday and De Hart said South Africa would perform slightly better and act as less of a drag on regional growth.

He included Angola, the third biggest economy in Africa when excluding northern countries such as Egypt and Algeria, as another heavyweight if Nigeria disappoints.

South Africa - where growth is expected to accelerate to 1.4% next year from 0.7% in 2019 - has been, alongside Nigeria, a drag on the continent as combined they make up about 50% of Africa's economy.

"West Africa is picking up pace nicely, not so much Nigeria though where the rebound is now again looking more fragile. East African growth is seen slowing slightly but will remain very robust from a regional perspective," said De Hart.

Zambia has also not been performing well due to a huge debt problem that has weighed on growth prospects. Zambia is expected to grow 3.3% next year, 0.3 percentage points higher than this year but slower than the almost 4.0% it grew last year.

African leaders launched a continental free-trade zone on Sunday after Nigeria finally signed up. If successful, it will unite 1.3 billion people and create a $3.4 trillion economic bloc, ushering in a new era of development.

But infrastructure bottlenecks have often frustrated efforts to develop an African manufacturing base similar to the Asian tigers.

"The meaningful impact would take at least 10 years of deliberate implementation," said Rafiq Raji, chief economist at Macroafricaintel in Lagos.

There will need to be a greater political will to make the trade pact work and avoid past failures, analysts said.

"Hurdles remain, with burgeoning youth populations, high unemployment, shrinking global value chains, and increasing deglobalisation. African governments have little choice but to make the AfCTA work," said Raji.

(For other stories from the Reuters global long-term economic outlook polls package see)

(Additional polling by Khushboo Mittal; Editing by Frances Kerry)

2019-07-19 16:37:25

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