Investment growth has declined sharply across the board
Sub-Saharan Afica faces a myriad of challenges to regain its growth momentum. One of thesechallenges is to overcome the protracted slowdown of growth of investment in the region.Investment growth in Sub-Saharan Afica fell from 6.8 percent in 2010-13 to 1.6 percent in
2021, with a sharper slowdown in AFE than AFW.Amid the economic fallout of the pandemicand the war in Ukraine, investment growth is expected to remain modest and below theaverage growth rate ofinvestment over the past two decades, not only in Sub-Saharan Africa,but also in other emerging markets and less developed economies.
The sharp deceleration ofinvestment growth has been broad-based across the subregions,resource abundant and resource scarce countries, and types of investors (public, private,and foreign). Oil abundant countries in the region have experienced the largest and morepersistent downswing in investment, as opposed to non-resource abundant countries,whichexhibit a more subdued dedine in investment. Rates of public, private, and foreign investmentgrowth have remained below their long-term averages for most years in the past decade.Whiledomestic private investment showed a modest dedine over time, foreign direct investmentexperienced a contraction during 2016-21.Bycontrast remittances remained resilient to thevarious shocks over the past decade—including the pandemic.
Slower investment growth in Sub-Saharan Africa is holding backlong-term growth of outputand per capita income, as well as progress toward achievement of the Sustainable DevelopmentGoals. Diffenences in the strength of the recovery acnoss subregions and countries are partlyrelated to differences in the growth of investment For instance, the slower growth recovery ofAFE relative to AFW is associated with the sharp slowdown in public investment and contractionof(domestic and foreign) private investment.Weakinvestment gnowth adds to macro-fiscalpressures, amid substantial finanding needs, limited fiscal space,and rising bornowing costs.
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