A gradual recovery in commodity prices and continued reform efforts are part of the new Africa narrative, but risks remain.
The North African region continues to struggle with the threats posed by Islamist extremists and more conventional militant groups. Bringing greater stability is a long-term project requiring a concerted effort on multiple fronts: social, political and economic. Reforms to reduce the public sector wage bill and energy subsidies will increase the fiscal space to improve spending on necessary developmental projects like infrastructure, education and healthcare, while also providing much-needed financing for smaller businesses and entrepreneurs. Within the region, Egypt’s economy presents a substantial investment opportunity as the country has successfully embarked on a strong reform programme. Overall, the North African region’s economy is forecast to expand by 4.5% in 2018, which is down from an estimate of 6% in 2017. Excluding Libya, the regional economy is set to improve slightly from 3.4% in 2017 to 3.5% in 2018. In sub-Saharan Africa (SSA), the average political risk for the region remained unchanged over the past quarter. However, a few countries are on a negative trend and could see risk downgraded should their political environments deteriorate. Ethiopia, Nigeria, Kenya, and Zambia all have negative trends while the DRC would be at risk of a further downgrade if our scale did not end at ‘high’. Worries about these States are counterbalanced somewhat by cautious optimism over the likes of Angola, South Africa and Zimbabwe where change seems possible after new leadership has taken the helm. The SSA recovery is forecast to gather more traction this year, with the fading impact of weather and terms of trade shocks augmented by a demand-driven recovery in commodity prices to yield a growth outturn of 3.6% this year from an estimated 2.7% in 2017. (Source: Africa Quarterly Update March 2017.)