EUR 9.24 For Business Accounts Only

Commodity price shocks dim growth lights across Africa

In this cut-out of our core strategy document—The Nigeria Strategy Report, we review developments across Africa over 2016 with key focus on macroeconomic and financial market developments. Furthermore, we outline our expectations for the region’s economic performance over 2017.

Extending the pattern from H1 16, the economic picture across Sub-Saharan Africa (SSA) remained weak in H2 16 with the IMF revising regional growth forecasts 160bps lower to a 20-year low of 1.4% YoY. The downgrade in growth forecasts stemmed from slowdowns across the region’s biggest economies starting with Nigeria, which reported three quarters of output contraction, and South Africa (SA), where a double-digit contraction in exports—a fall-out of the country’s worst drought in over a century which impacted agriculture output (22% of GDP)—led to negative growth in Q1 16 (-0.2% YoY). In addition to these setbacks, commodity-induced pressures on external account cascaded to currency depreciation across Africa. For SSA oil exporters, currency crisis was exacerbated by a worryingly lethargic policy response to depressed crude prices despite sizable contractions in government revenues and foreign reserves.