From FocusEconomics
Recovery remained on a firm footing in Q3
Growth in the Sub-Saharan Africa (SSA) economy was steady in the third quarter and the region remains firmly entrenched on a path to recovery after a sharp slowdown in 2016. Preliminary data revealed that regional GDP expanded 2.6% annually in Q3, matching Q2’s result. The third-quarter reading marks the second strongest growth rate in nearly two years as the SSA economy benefits from commodities prices firming up and stronger global growth.
Looking at the third-quarter growth figure in detail, South Africa’s economy lost momentum. Weak confidence, high unemployment and a sharp drop in exports held back growth. The country’s recovery has been rocky due to political uncertainties and underwhelming structural reforms. While progress has been made, stronger policy action is needed to address labor market rigidities and inefficient state-owned enterprises. In contrast, Nigeria’s economy gained steam, growing at the fastest pace since Q3 2015 on the back of higher oil prices and production. Meanwhile, growth in Mozambique was steady at Q2’s pace. GDP data is still outstanding for the remainder of the region’s economies.
The region’s political scene has remained tumultuous in recent weeks. After two divisive votes, Uhuru Kenyatta was finally sworn in for a second term as president of Kenya on 28 November, although the political situation remains tense. Concerns over the country’s institutions and the legitimacy of the election persist, and these issues are likely to continue weighing on confidence going forward. Meanwhile, a leadership crisis is brewing in Uganda, as President Yoweri Museveni seeks to abolish age limits for presidents—some analysts see this as an attempt to run for a sixth term. The move has sparked outrage and could lead to social unrest if the measure is enacted. In South Africa, the governing African National Congress (ANC) will elect a new leader at the 16- 20 December conference. The race between candidates is tight, and the new leader could influence policy in the coming year and be the next leader of the country if the ANC holds on to power in the 2019 vote.
Commodity price uptick to fuel stronger growth next year
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Higher commodity prices, lower inflation and improved access to international financial markets should lead the recovery to pick up steam next year, following a projected 2.4% expansion in 2017. The Consensus Forecast for the region’s economy was left unchanged this month, and GDP is seen growing 3.3% in 2018. However, numerous risks surround the outlook, including upcoming elections, rising public debt and exchange rate distortions in many economies. In 2019, GDP is projected to expand 3.6%.
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