Sub-Saharan Africa posted a three percent economic growth in 2015, down from 4.5 percent in 2014 due to failing commodity prices, the World Bank said on Monday.
The World Bank said its 2016 growth forecast remains subdued at 3.3 percent, well below the robust 6.8 percent growth in Gross Domestic Product (GDP) that the region sustained in the 2003-2008 period.
"Overall, growth is projected to pick up in 2017-2018 to 4.5 percent," the WB said in its Africa's Pulse, the World Bank's twice-yearly analysis of economic trends and latest data for the region.
World Bank Vice President for Africa Makhtar Diop who launched the report said the plunge in commodity prices, particularly oil, which fell 67 percent from June 2014 to December 2015, and weak global growth, especially in emerging market economies, are behind the region's lackluster performance.
"With the trend of falling commodity prices, particularly oil and gas, it is time to accelerate all reforms that will unleash the growth potential of Africa and provide affordable electricity for the African people," Diop said via video conference from Washington.
Diop said as countries adjust to a more challenging global environment, stronger efforts to increase domestic resource mobilization will be needed.
The report says growth is expected to edge up in Ghana, driven by improving investor sentiment, the launch of new oilfields, and the easing of the electricity crisis.
In Kenya, growth is expected to remain robust, supported by private consumption and public infrastructure investment.
The WB says commodity price drops have lowered Africa's terms of trade in 2016 by an estimated 16 percent, with commodity exporters seeing large terms-of-trade losses.
"Across the region in 2016, the impact of this shock is expected to lower economic activity by 0.5 percent from the baseline, and to weaken the current account and fiscal balance by about 4 and 2 percentage points below the baseline, respectively," it says.
The projected pickup in activity in 2017-2018 reflects a gradual improvement in the region's largest economies, Angola, Nigeria and South Africa, as commodity prices stabilize and growth-enhancing reforms are implemented.
"In several instances, the adverse impact of lower commodity prices was compounded by domestic conditions such as electricity shortages, policy uncertainty, drought, and security threats, which stymied growth," Africa Pulse says.
According to the report, there were some bright spots where growth continued to be robust such as in Côte d'Ivoire, which saw a favorable policy environment and rising investment, as well as oil importers such as Kenya, Rwanda and Tanzania.
"The external environment confronting the region is expected to remain difficult. In a number of countries, policy buffers are weaker, constraining these countries' policy response," it says.
The World Bank notes that delays in implementing adjustments to the drop in revenues from commodity exports and worsening drought conditions present risks to Africa's growth prospects. It, however, says several countries are expected to see moderate growth.
To build sufficient infrastructure projects, the report says, policy makers will need to direct attention toward the deeper structural problems that misallocate land, fragment development and limit productivity.
"To ensure growth and social development, cities need to become less costly for firms and more appealing to investors," says Punam Chuhan-Pole, Acting Chief Economist, World Bank Africa and the report's author.
The WB said sub-Saharan Africa countries will continue to face low and volatile prices in global commodity markets.
"Governments must take steps to adjust to a new, lower level of commodity prices, address economic vulnerabilities and develop new sources of sustainable, inclusive growth," Africa Pulse says.