Low commodity prices, weak confidence drag down growth
Nigeria’s economy forecast to contract 1.7% this year
The International Monetary Fund has cut its 2017 economic growth forecasts for Africa’s two largest economies as low commodity prices, policy uncertainty and weak investor confidence weigh on output.
Gross domestic product in South Africa will probably expand 0.8 percent next year, compared with the 1 percent forecast in July, the Washington-based lender said in its World Economic Outlook Report Tuesday. Nigeria’s economy will contract 1.7 percent this year and expand 0.6 percent in 2017, less than the 1.1 percent the IMF earlier forecast. The two nations make up more than half of the sub-Saharan Africa’s GDP.
The fall in global commodity prices has hindered economic growth in the continent’s biggest producers of oil and minerals like platinum and gold, and led to a slump in foreign-currency earnings. In Nigeria, electricity shortages and militant activity that disrupts oil production have lowered output and in South Africa policy uncertainty is making adjustment to weaker terms of trade difficult, the IMF said.
“Momentum in South Africa was flat, despite the improvements in the external environment,” the lender said. There will be “only a modest recovery next year as the commodity and drought shocks dissipate and power supply improves.”
The Nigerian economy contracted in the first half of the year and inflation accelerated to the highest rate in more than a decade as a 15-month currency peg, that was removed in June, hampered imports of manufacturing inputs and drove up consumer prices. The cut in the growth forecast for next year reflects temporary disruptions to oil production, foreign-currency shortages due to a fall in crude receipts, lower power generation and weak investor confidence, the lender said.