The worst is yet to come

Growth in Sub-Saharan Africa fell to a 16 year-low last year, and we believe that growth will weaken even further 2016. Three key factors will drive this decline. First, a combination of drought, declining mine output, and a widening political scandal will cut growth in South Africa to just 0.5% in 2016. Second, Nigerian policymakers’ botched response to the country’s slow-burning balance of payments crisis will squeeze domestic demand in the region’s largest economy. Finally, the lingering effect of last year’s falls in commodity prices will continue to hit growth, particularly in Angola, which has yet to make a serious adjustment, and Zambia, where mining firms cut production midway through 2015. Positive growth stories are few and far between, and most concern small economies like Uganda or Côte d’Ivoire. And risks to this bleak forecast lie almost entirely to the downside. We expect commodity prices to recover somewhat in 2016 as the Chinese economy accelerates; a downturn there would put even more pressure on battered African economies. And while we expect slow growth in Nigeria and South Africa, acute crises are possible in both countries, which collectively make up over half of regional GDP.