Nigeria’s 2021 investment three per cent less than seven years earlier, says World Bank
• SSA gets only 3% of 2011-2021 investments in emerging markets
• Worries over slowing long-term global growth
The World Bank has decried the impact of consistent decline in capital formation in sub-Saharan Africa (SSA), noting that the value of the retained investment in Nigeria as of 2021 was three per cent short of what was recorded in 2014.
But Nigeria still fares better when compared with South Africa in terms of the shortfall in retained investment in recent years.
The former apartheid country, which controlled about a quarter of investment flow to SSA, had its investment value slashed by 20 per cent two years ago compared to seven years earlier.
The trend is contained in the World Bank report titled, ‘Falling Long-term Growth Prospects: Trends, Expectations, and Policies’ and released yesterday. The 564-page document reports trends, expectations and policies that have shaped growth in recent years and takes a long-term view of regional economic outlooks while highlighting the distortion of the COVID-19 risks.
It offers the first comprehensive assessment of long-term potential output growth rates in the aftermath of the COVID-19 pandemic and the Russia-Ukraine war.
On SSA, the report noted: “Much of the slowdown in investment growth in SSA since 2014 is accounted for by weakness in South Africa and the oil exporters, especially Angola and, to a lesser extent, Nigeria. Even by late 2021, investment in Nigeria and South Africa, the region’s two largest economies, was 3 percent and 20 percent lower, respectively, than in 2014.”
From 2011 through 2021, the World Bank said, SSA accounted for only three per cent of investment in the Emerging Markets and Developing Economies (EMDE), which covers Africa, Asia and other emerging countries.
“Following the commodity price collapse of 2014-16, SSA suffered the sharpest investment growth slowdown among EMDE regions, from an average of 5.9 per cent a year in 2011-2014 to a decline of 0.3 per cent a year in 2015-2017, well below the long-term (2000-2021) average annual growth rate of 4.6 per cent.
“Investment growth picked up to 6.3 per cent a year during 2018-19, before being halted by the COVID-19 pandemic. This triggered a 5.8 per cent drop in investment in the region in 2020, much larger than the 1.5 per cent decline in EMDEs as a whole. The subsequent recovery has been tepid,” the report stated.
The report warned that the global economy is likely to fall to a three-decade low by 2030 amid systemic banking crises and recessions having lasting effects on growth and development.
It noted that an ambitious policy push is urgently required to boost productivity and labour supply, ramp up investment and trade and harness the potential of the services sector.
The report documents a worrisome trend – nearly all the economic forces that triggered progress and prosperity over the last three decades are fading.
Hence, between 2022 and 2030 average global potential GDP growth is expected to decline by roughly a third from the rate that prevailed in the first decade of the century – to 2.2 per cent a year.
It noted that the decline would be equally steep for developing economies, where it is expected to fall from six per cent a year between 2000 and 2010 to four per cent a year in the remainder of this decade.
Reacting to the findings of the report, the World Bank’s Chief Economist and Senior Vice President for Development Economics, Indermit Gill, said: “A lost decade could be in the making for the global economy. The ongoing decline in potential growth has serious implications for the world’s ability to tackle the expanding array of challenges unique to our times – stubborn poverty, diverging incomes, and climate change. But this decline is reversible.
The global economy’s speed limit can be raised through policies that incentivise work, increase productivity and accelerate investment.”
The analysis shows that potential GDP growth could be boosted by as much as 0.7 percentage points to an annual average rate of 2.9 per cent if countries adopt sustainable, growth-oriented policies.