Global growth could be weaker than projected -World Bank

 The World Bank has cautioned that the growth outlook for Sub-Saharan Africa, including Ghana, is facing increased downside risks.

According to the Bret­ton Woods institution, global growth could be weaker than projected if global trade tensions were to escalate further.

In its June 2024 Global Pros­pects, the World Bank said the di­rect effects of the increased U.S. trade barriers on SSA economies are expected to be contained, as the region exports relatively few manufacturing goods to the United States.

However, it said should if trade fragmentation increases further or leads to a sharper slowdown in global growth, the adverse effects on SSA econo­mies could be considerable due to their dependence on commod­ity trade.

“Indeed, a worse-than-ex­pected economic slowdown in China would adversely affect the demand for minerals and metals. Lower prices for these commod­ities, which are the main exports of several SSA countries, would have particularly negative effects on these countries through diminished economic activity and even tighter fiscal space,” it stressed.

“Conversely, should glob­al trade tensions subside, the growth outlook for SSA would benefit from improved global economic activity, lower export tariffs, higher demand for com­modities, reduced uncertainty, and stronger global investors’ risk appetite,” it indicated.

Another prominent downside risk, it said, was the possibility of worsening political instability within SSA, with violent con­flicts lasting longer or escalating further, especially in East Africa and the Sahel.

It added that an intensifica­tion of armed conflict in Sudan could drive up food prices in parts of SSA due to reduced supply and increased transporta­tion costs.

It continued that if regional or global policy interest rates de­cline more slowly than expected, there may be adverse effects on debt-servicing costs and debt dynamics.

Similarly, a decrease in global investors’ risk appetite could increase the costs of debt refi­nancing.

“Coping with high debt servicing costs is already a chal­lenge for many countries in the region. Persistently high global interest rates could heighten the risk of government debt distress by further increasing interest rates on non-conces­sional debt. Indeed, heightened global uncertainty and reduced investor risk appetite have already led to sharp jumps in the cost of government borrowing in SSA, putting at risk the recent progress in fiscal consolidation,” it explained.