The World Bank forecast has predicted that the fall in prices of oil and other commodities are likely to slow economic growth in Sub-Saharan Africa to four percent in 2015 from 4.5 percent in 2014.
The bank said in its Africa's Pulse, a twice-yearly analysis of the issues shaping Africa's economic prospects, released in Nairobi that excluding South Africa, the average growth for the rest of Sub-Saharan African countries is forecast to be around 4.7 percent.
“As previously forecast, external tailwinds have turned to headwinds for Africa's development. It is in these challenging times that the region can and must show that it has come of age, and can sustain economic and social progress on its own strength,” said Francisco Ferreira, the bank's chief economist for Africa.
"For starters, recent gains for the poorest Africans must be protected in those countries where fiscal and exchange rate adjustments are needed," Ferreira added.
The 2015 forecast is below the 4.4 percent average annual growth rate of the past two decades, and well short of Africa's peak growth rates of 6.4 percent from 2002 to 2008.
The report says the continent's huge economic diversity is also mirrored in the impact of commodity price declines, even among oil producers.
It notes that although the Nigerian economy will suffer this year, growth is expected to rebound in 2016 and beyond, driven by a relatively diversified economy, and a buoyant services sector.
Low oil prices will continue to weigh down on prospects of less diversified oil exporters such as Angola and Equatorial Guinea. In several oil-importing countries, such as Cote d'Ivoire, Kenya and Senegal, growth is expected to remain strong.
In Ghana, still high inflation and fiscal consolidation will weigh on growth. In South Africa, growth continues to be curtailed by problems in the electricity sector.
World Bank Vice President for Africa Makhtar Diop, who spoke earlier said, despite strong headwinds and new challenges, Sub-Saharan Africa is still experiencing growth. And with challenges come opportunities.
“The end of the commodity super-cycle has provided a window of opportunity to push ahead with the next wave of structural reforms and make Africa's growth more effective at reducing poverty.”
According to the report, the fiscal policy stance is expected to remain tight throughout 2015 in most net oil-exporting countries across the region, as countries take measures to rein in spending in light of anticipated lower revenues.
While capital expenditures are expected to bear the brunt of expenditure measures, recurrent expenditures, including fuel subsidies, will also be reduced.
Despite these adjustments, fiscal deficits are likely to remain high. Fiscal deficits are also expected to remain elevated in net oil-importing countries.
“Large fiscal deficits and inefficient government spending remain sources of vulnerability for many countries of the region,” said Punam Chuhan-Pole, World Bank Lead Economist for Africa and co-author of the report.
Sub-Saharan Africa is a net exporter of primary commodities. Oil is the most important commodity traded in the region, followed by gold and natural gas.
“It is urgent that these countries strengthen their fiscal positions and fortify their resilience against external shocks,” Chuhan-Pole added.
New and Old Risks to Africa's Economic Future
Persistent conflict in a number of areas, and recent violence by extremist groups such as Boko Haram and Al Shabaab pose security risks with the potential to undermine development gains. Also, the Ebola outbreak in Guinea, Liberia, and Sierra Leone has highlighted preexisting weaknesses in the health systems of the three most affected countries, as well as others.
Although substantial progress has been made against the Ebola epidemic, it remains premature to declare victory until there are zero cases left. A World Bank study released in January estimated that the three hardest-hit countries (Guinea, Liberia and Sierra Leone) will face at least $1.6 billion in forgone economic growth in 2015, and social costs in terms of nutrition, health and education are equally severe. The Bank Group has mobilized about $1 billion in financing to date for the three countries hardest hit by Ebola.