The value of the retained investment in Nigeria as of 2021 was 3% less than what was reported in 2014, according to the World Bank, which has lamented the effects of SSA’s ongoing drop in capital formation.
Nonetheless, Nigeria still performs better than South Africa in terms of the decline in retained investment during the past few years.
When compared to seven years prior, the investment value of the former apartheid nation, which controlled roughly a quarter of investment flow to SSA, was reduced by 20% two years ago.
The pattern is detailed in a World Bank research published yesterday titled “Falling Long-term Growth Prospects: Trends, Expectations, and Policy.” The 564-page research details recent growth trends, forecasts, and policies. It also takes a long-term look at regional economic outlooks while noting the COVID-19 risk’s potential for distortion.
It provides the first thorough analysis of projected long-term output growth rates following the COVID-19 pandemic and the Russia-Ukraine war.
On SSA, the report stated: “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.”
Just 3% of investments in the Emerging Markets and Developing Economies (EMDE), which includes Africa, Asia, and other emerging nations, were made in SSA from 2011 to 2021, according to the World Bank.
“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 issued a warning that systemic financial crises and recessions with long-lasting consequences on growth and development are expected to cause the global economy to contract to a three-decade low by 2030.
It was stated that in order to increase productivity and the labor supply, increase trade and investment, and unlock the potential of the services industry, aggressive legislative initiatives are urgently needed.
Nearly all of the economic drivers that sparked progress and prosperity over the past three decades are receding, according to the analysis, which highlights a concerning trend.
As a result, from the pace that occurred in the first decade of the century, to 2.2% a year, on average, global potential GDP growth is predicted to drop between 2022 and 2030.
According to the report, the decline would be equally severe for developing nations, where it is anticipated to drop from 6% annually between 2000 and 2010 to 4% annually for the remaining years of this decade.
Indermit Gill, the chief economist and senior vice president for development economics at the World Bank, responded to the report’s conclusions as follows: “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.”
According to the analysis, if nations adopt sustainable, growth-oriented policies, potential GDP growth might be increased by as much as 0.7 percentage points, reaching an annual average rate of 2.9 percent.
