Gradual acceleration, but recovery will be slow

After two years of progressively slower growth, most African economies will strengthen in 2017. This recovery will be driven by rising commodity prices, which should ease strains in the balance of payments, and weaker inflation (in most countries). The end of several one-off disruptions, including droughts in several economies, will also help. But the recovery will be tepid: the blow dealt by the fall in commodity prices in 2015 has exposed structural weaknesses in many of the region’s largest economies, which we believe will limit growth over the medium term. Potential growth is now lower than it was during the “Africa Rising” decade. More immediately, we believe that the worst currency falls are now behind us. We expect, however, that monetary policy will remain tight, and interest rates will actually rise in Nigeria, South Africa, and Angola. Fiscal policy will have to tighten across the region, which will also weigh on demand. We expect regional growth of just 3.2% in 2017 and 3.7% in 2018. Risks, moreover, lie largely to the downside. A return to the rapid growth rates posted between 2004 and 2014 is highly unlikely.