Overall economic growth prospects for the Africa region are favourable. Most banks will raise capital base and maintain stable profitability, but weak asset quality will remain a key concern
February 28, 2019 | Wendy Weng
The economic growth across Africa has recovered further in 2018, supported by higher average oil and commodity prices and fiscal consolidation, as well as better agricultural conditions and increased consumer spending and public investment in nonresource-intensive countries. Plenty of reforms have been implemented in the region, which resulted in the strengthened regional business climate. In addition, the improvement in tourism also helped bolster growth in North Africa.
However, the growth was slower than expected, partially due to the weakness in countries like Nigeria, Angola and South Africa. Despite the higher oil prices, capacity constraints led to lower oil production in Nigeria and Angola. Meanwhile, non-oil activity in Nigeria was dampened by sluggish private demand and the conflicts which hampered food production. South African’s growth remained subdued, mainly owning to continued political and policy uncertainty and contractions in agriculture, mining, and construction.
Overall, African countries’ fiscal deficit shrank thanks to the increase in commodity revenues and cuts in capital spending, but there has been little progress in raising domestic revenues. Meanwhile, public debt remains high and continues to rise in some countries, as well as mounting concerns over debt sustainability. The governments need to adopt innovative and strategic approaches in mobilising revenue domestically, as it will help reduce debt vulnerabilities and create fiscal space for investment and development spending. In addition, more efforts are needed to implement a regional integration to help achieve a sustained and inclusive growth.
A slight acceleration in economic growth is expected in the region in 2019. The oil and commodity prices are anticipated to be relatively stable, and the economic outlook for the non-resource intensive countries will remain positive on the back of robust public investment and strong agricultural output. Howev...
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