Trying to get to grips with what to expect from Africa’s economies in 2019 can be broken out into three categories of discussion: the good, the underwhelming and the disconcerting.
The good news is that in 2019, like in 2018, Sub Saharan Africa will be home to several of the world’s fastest-growing economies, according to the IMF. The region’s growth numbers will be led again by Ethiopia, Rwanda, Ghana, Côte d’Ivoire, Senegal, Benin, Kenya, Uganda, and Burkina Faso who remain in the top 10. Tanzania joins that group this year, replacing Guinea. The region is expected to have overall economic growth of 3.8%, on par with the global forecast of 3.7%.
That growth is driven by the steady rebound of commodity prices, an improvement in the global economy and improved capital market access after several of the countries made valiant attempts to get their fiscal books in order following the commodity price slump of 2014-15.
But those numbers would be even better were it not for the underwhelming projections from the continent’s big two: Nigeria and South Africa. Both are recovering from a pretty tough 2018 and both have presidential elections this year.
Nigeria is expected to see an expansion of 2.3%—better, but not much, than the 1.9% of 2018. South Africa will expand by 1.4% which is, again, an improvement on 0.8% last year, but nothing to cheer about. As Washington DC think tank Brookings notes in this year’s Foresight Africa report, that kind of growth doesn’t look great up against 2.5% annual population growth.
If you leave out the big two and Angola, aggregate growth for Sub Saharan Africa rises to 5.7% for 2019. “About half of the world’s fastest-growing economies will be located on the continent, with 20 economies expanding at an average rate of 5% or higher over the next five years, faster than the 3.6% rate for the global economy,” writes Brahima Coulibaly, director of Brookings’ Africa Growth Initiative.
However, we must address the elephant in the room when it comes to African economies in 2019 and that is, of course, rising debt.
We’re coming to the end of a decade of cheap debt which some African countries piled on in the latter half of that decade. There’s a real risk, with the likelihood of global recession in 2020, commodity prices will fall as demand drops. Several African countries might struggle to manage their debt servicing—especially if interest rates continue to rise.
Brookings says “at least” 14 countries are either in debt distress or at high risk of debt distress up from six countries just five years earlier. These countries currently have total debt of around $160 billion, of which $90 billion is external debt.
As we’ve written in the past, Africa’s growing debt is a ticking time bomb. The average debt to GDP ratio rose to 57% in 2017 and has hit extremes in countries including Cape Verde, Eritrea, Congo Brazzaville and Mozambique where it exceeds 100% of GDP.
As the global economic environment changes updating debt management strategies should be a priority for African policymakers in 2019, and they’ll need “to take bold steps to strengthen governance around tax revenue collection.”