The World Bank has warned that risks to the Sub-Saharan Africa growth outlook, including Ghana are tilted to the downside.
According to the Bretton Woods institution, global growth could be weaker than projected if global trade tensions were to escalate further.
In its June 2024 Global Prospects, the World Bank said the direct effects of the increased U.S. trade barriers on SSA economies are expected to be contained, as the region exports relatively few manufacturing goods to the United States.
However, it said should if trade fragmentation increases further or leads to a sharper slowdown in global growth, the adverse effects on SSA economies could be considerable due to their dependence on commodity trade.
“Indeed, a worse-than-expected economic slowdown in China would adversely affect the demand for minerals and metals. Lower prices for these commodities, which are the main exports of several SSA countries, would have particularly negative effects on these countries through diminished economic activity and even tighter fiscal space”, it stressed.
“Conversely, should global trade tensions subside, the growth outlook for SSA would benefit from improved global economic activity, lower export tariffs, higher demand for commodities, reduced uncertainty, and stronger global investors’ risk appetite”, it indicated.
Another prominent downside risk, it said, is the possibility of worsening political instability within SSA, with violent conflicts lasting longer or escalating further, especially in East Africa and the Sahel.
It added that an intensification of armed conflict in Sudan could drive up food prices in parts of SSA due to reduced supply and increased transportation costs.
Interest Rates on Debt Servicing
It continued that if regional or global policy interest rates decline more slowly than expected, there may be adverse effects on debt-servicing costs and debt dynamics.
Similarly, a decrease in global investors’ risk appetite could increase the costs of debt refinancing. “Coping with high debt servicing costs is already a challenge for many countries in the region. Persistently high global interest rates could heighten the risk of government debt distress by further increasing interest rates on non-concessional debt. Indeed, heightened global uncertainty and reduced investor risk appetite have already led to sharp jumps in the cost of government borrowing in SSA, putting at risk the recent progress in fiscal consolidation”, it explained.
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