# **1. Growth in SSA and Structural Change**

Small, landlocked developing economies have struggled to match the performance of countries with a coastline, and those in Sub-Saharan Africa (SSA) face the sternest challenge. Of the fifteen African landlocked countries, thirteen are clustered near the bottom of the United Nations Human Development Index in 2014.<sup>1</sup> Geographical distance from ports is partly to blame for the relatively slower and divergent pace of development and low per capita incomes. This is compounded by the reliance on good cross-border relations with neighbors, on the availability of secure transport infrastructure and electric power, and on the political stability of neighboring countries. In some instances, resource scarcity, high rates of population growth and shortcomings of trade and exchange rate policies, add to the burdens of landlockedness (Hallaert et al 2011, Sachs 2012).

After two “lost decades” the fortunes of the landlocked countries along with other SSA countries began reviving around the turn of the century. Between 2004 and 2008, GDP in the SSA’s frontier and emerging market economies grew annually by 6.6 percent. The increasing tempo of global demand was largely responsible for accelerating growth in SSA. It raised the prices of natural resource based commodities exported by African countries. Real prices of oil and minerals increased more than twofold between 2003 and 2008, which benefitted the resource rich economies. At the same time, debt relief eased burdens on some of the poorest countries. The SSA region more broadly, profited from the emergence of democratic forms of government that were less predatory, extractive and urbanbiased - a change that was advantageous for agriculture.<sup>2</sup> This also helped usher in better macroeconomic management combined with structural reforms impinging upon trade and domestic pricing policies especially for agricultural commodities. From about 2008 onwards, some African countries could lower their international borrowing costs courtesy of monetary easing in advanced and middle-income countries and improved balance sheets; and capital inflows lured by the promise of higher returns in SSA than elsewhere, provided a welcome injection of resources.

During 2009 through 2015 growth in SSA slowed to an average rate of 4.9 percent and to just 2 percent during 2016-2017.<sup>3</sup> For many countries, growth of per capita incomes entered negative territory during 2016-2017. The commodity super cycle ended with weakening demand from China and the industrialized economies drastically lowering the prices of Africa’s key exports. This was paralleled by the sluggishness of economic recovery in developed economies and the slowing of trade to under 3 percent per annum between 2012 and 2017.

The medium-term prospects for SSA have improved somewhat with the revival of OECD growth rates but to avoid sliding back into the old normal of slow growth or

> 1 <u>http://hdr.undp.org/sites/default/files/ranking.pdf</u>

> 2 Bates et al 2012 <u>http://journals.sagepub.com/doi/abs/10.1177/2233865912462373</u>

> 3 IMF (2017) <u>https://www.imf.org/en/Publications/REO/SSA/Issues/2017/10/19/sreo1017</u>

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