A fresh report from Stanbic bank reveals that the global savings glut is failing to boost Africa’s growth as was presumably believed.
“It seems pretty clear that there are plenty of savings globally, especially from developed markets, looking for attractive investment opportunities. African policymakers, in countries that have a dearth of domestic savings relative to investment opportunities, who do not attract these excess savings will commit their countries to sub-par growth for no particularly good reason,” cites the report.
According to the report the presently depressed global economy does not augur well in accelerating economic growth. The depression is said to be much prevalent with advanced economies, as defined by the international monetary Fund (IMF). The Fund forecast 2016 global GDP growth at 3.2 percent year on year, accelerating to 3.5 percent year on year in 2017. While it forecast that emerging and developing economies are likely to grow by 4.1 percent year on year and 4.6 percent year on year in 2016 and 2017 respectively, it expects advanced economies to grow by 1.9 percent year on year and 2.0 percent year on year respectively. Although growth for developing countries appears better than that of advanced countries, growth in Africa is still expected to be slower and therefore does not promise much.
“Another undeniable feature characterising African economies is that countries that have traditionally not depended on metals or oil exports, have a more diversified export basket and generally have large fiscal and C/A deficits (and by implication large capital inflows), are continuing to grow robustly. This also suggests that strong capital inflows will continue to be a key differentiator of growth amongst African countries,” the report highlights.
The savings glut comes on the backdrop of declining domestic savings, which has been demonstrated by the move from surplus to deficits. This movement according to the report will result in a decline of investment spending. “For investment, and hence overall economic growth, to remain robust, diminished domestic savings would need to be augmented by greater capital inflows,” states the report.