By Tapiwanashe W. Mangwiro.
HARARE – (News of The South) – In October 2019, the World Economic Outlook (WEO) deemed that the global economy was in a synchronized slowdown due to a number of disruptions that were happening. Since then some have cooled down and some seem to be on the rise and the outlook has remained sluggish.
The WEO has in their latest report of January 2020 revised global growth projections to 2.9% in 2019, 3.3% in 2020 and 3.4% in 2021. The new projections reflect a 0.1% decrease for 2019 and 2020, with 2021 revised downwards by 0.2%.
For Sub-Saharan Africa (SSA) growth is forecasted to be slow to stagnant as the major economies are going to realise low to no growth. SSA is projected to grow by 3.3% in 2019, 3.5% in 2020 and 2021.
This is on the back of low growth in Nigeria and South Africa the major economies in the region. South Africa is projected to grow by 0.4% in 2019, 0.8% in 2020 and 1% in 2021, whilst Nigeria will grow by 2.3% in 2019 and 2.5% in 2020 and 2021.
The region’s growth is not going to be helped by the fact that the Low-income Developing Countries (LDCs) are also going to experience flat growth in 2020 and 2021 of 5.1% from a projected 5% in 2019.
Growth will remain sluggishly low due to the current and possible tensions in the world. With the US-China trade war on the low after the recently signed phase one of the trade deal and the low risk of a no BREXIT deal have given the global economy little hope.
However new tensions between the US and the EU seem to be brewing up and might also result in another trade war. Social unrests have since picked up in the last quarter of 2019 will also shove in negative effects as there is little time to react to the demands and turn non production into production time in order to stimulate growth.
Tensions like these tend to spill over to emerging markets as they are left with policy adjustment issues and it disrupts growth. Emerging markets will lose markets mostly due to weak demand from low trade activity of the major economies.
In order to stimulate growth, nations need to enter more multilateral deals in order to spread growth and prosperity in their regions. Protectionist trade barriers that are aimed at reducing the level of trade between countries need to be reversed as the manufacturing and services industry are expected to boom as the slump seems to be bottoming out.
For countries with high debt levels they should increase their cash holdings through enhanced and effective revenue mobilizing techniques in order to cushion themselves as loans will be hard to come by. They also should enhance their automatic stabilizers if there is to be a shock as a contingent measure to a huge slump in growth.
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