Capital Ethiopia Newspaper

WB projects slowdown in global economy despite SSA uptick

Ethiopia’s 2012 growth estimated at 7.2%

Global economic growth is expected to slow to 2.5 percent but Ethiopia should see a robust 7.2 percent increase, according to a World Bank (WB) report released this week.

Sub-Saharan Africa as a whole saw an increase of 0.3 percent. 

WB estimates that Ethiopia, Ghana and Democratic Republic of Congo will see a robust 7.2 percent growth which is lower than the  Ethiopian government’s baseline projection of 11 percent but still very high.

Niger holds the most highest projection of 9.5 percent, followed by Angola at 8.1 percent and Tanzania at 8.0 percent.

The US, at 2.1 percent, and Sub-Saharan Africa are the only regions expected to grow.

Europe and Central Asia are expected to have the steepest decline; 1.7 percent; followed by Latin America and the Caribbean region with 0.8 percent decline and East Asia and the Pacific region with a decline of 0.7 percent.

The South Asia Sub-continent is expected also to exhibit a decline of 0.7 percent while the Middle East and North Africa’s already anemic growth rate is estimated to drop by 0.4 percent.

The projected uniform decline in all the regions except sub-Saharan Africa is likely being caused by issues like the Eurozone crisis, domestic turmoil and commodity price declines as well as other financial meltdowns in Europe and the Middle East.

The decline in tourism will affect the Caribbean and North America, while the disorderly unwinding of Sovereign Debt Obligations in the developed world are another major factor.

Sub Saharan Africa is growing because demands for good are increasing as people have more disposable income, infrastructure is improving, and productivity is increasing.

Higher commodity prices and improved macroeconomic and political stability in recent years have also supported increased investment flows into the region. Private capital flows increased to USD 42.4 billion in 2011. Notwithstanding a significant slowdown in the latter half of 2011, export volumes increased by 10.6 percent in 2011 and overall tourist arrivals were up by 6.2 percent.

The report reveals that medium term prospects for the region remain robust as long as Europe does not experience a severe financial meltdown. On this basis, global demand is projected to firm towards the end of 2012 and expand through 2014.

The report also stated that domestic demand in Sub-Saharan Africa is projected to remain robust, and growth is expected to strengthen to five percent in 2012, 5.3 percent in 2013 and 5.2 percent in 2014. Excluding South Africa, growth is expected to reach 6.4, 6.2 and 6 percent in 2012, 2013 and 2014 respectively.

Rising incomes, lower inflation, higher remittance flows (rising to USD 27 billion by 2014, from USD 22 billion in 2011) and lower interest rates in some countries are expected to support growth in private consumption.

Infrastructural investment, particularly from China, India and Brazil, should bolster productive capacity. Growth in resource rich countries like Angola, Cameroon, Gabon, Ghana and Mozambique are expected to be supported by the coming stream of new exports.

However it said the growth prospects for Sub-Saharan Africa are dependent on developments in the Euro area as well as on the extent of the slowdown in China.