African growth may be affected by US-China trade tensions: African Development Bank

Persisting trade tensions between economic superpowers the United States and China could shave 0.7 per cent from Africa’s GDP in 2019, a senior official at the African Development Bank (AfDB) said on Friday.

Hanan Morsy, director of the AfDB’s macroeconomic policy department, predicted on the sidelines of an African Union meeting in Addis Ababa as fresh doubts emerged over the prospects for US-China trade war negotiations.

She was speaking after the release of the bank’s African Economic Outlook 2019 report, which said the continent registered growth of 3.5 per cent in 2018 and was expected to grow 4 per cent in 2019. This is higher than in most regions of the world but still insufficient to address persistent fiscal and current account deficits and “unsustainable debt”.

Furthermore, the ongoing trade battle between the US and China could “have a negative impact of 0.7 per cent of GDP from Africa. This impact will be through lack of trade and investment flows”.

“AfDB, in particular, expects a noticeable impact in the tradeable sectors, including export commodities like minerals, oil and food-related products,” she added.

The United States has threatened to more than double existing tariffs on Chinese goods at the start of March if there is no agreement on measures to reform China’s trade practices, which Washington says are deeply unfair.

US President Donald Trump said Thursday he did not expect to meet his Chinese counterpart Xi Jinping before the March 1 deadline, leading to a slump in world stock markets.

Top White House economist Larry Kudlow told Fox Business on Thursday that while Trump was “optimistic” about prospects for a deal, there remained a “sizeable distance” separating the two sides.

A lack of a breakthrough could weaken the global economy, with already gloomy growth forecasts from the European Commission on Thursday which predicted lower than expected growth of 1.3 per cent in the eurozone this year.

A slowdown in the global economy could lead to a decline in demand for Africa’s exports, more than 60 per cent of which head to the US, China and Europe, said the AfDB report.

The report said that in 2019, 40 per cent of African countries are projected to see a growth of at least 5 per cent.

However, a burgeoning working-age population means the continent needs to create 12 million jobs a year, meaning the nature of economic growth has to change to move away from mainly informal sector jobs.