This paper analyses economic implications and the transmission mechanisms of different options for creating and using fiscal space. For creating fiscal space, we consider prioritizing expenditures, raising revenue, and scaled-up aid. Fiscal space is used for increasing health and education spending, infrastructure spending, or both. The analysis takes place within the World Bank's MAMS model, which is a multisectoral real computable general equilibrium model that incorporates the Millennium Development Goals. The model has been calibrated for Burkina Faso, which serves as an illustrative country example. Some of the key results are that absorbing a more educated labor force requires fundamental structural change in the economy; increasing health and education spending can face sizeable capacity constraints; and infrastructure spending has a positive effect on growth as well as education and health outcomes.

This paper analyses economic implications and the transmission mechanisms of different options for creating and using fiscal space. For creating fiscal space, we consider prioritizing expenditures, raising revenue, and scaled-up aid. Fiscal space is used for increasing health and education spending, infrastructure spending, or both. The analysis takes place within the World Bank''s MAMS model, which is a multisectoral real computable general equilibrium model that incorporates the Millennium Development Goals. The model has been calibrated for Burkina Faso, which serves as an illustrative country example. Some of the key results are that absorbing a more educated labor force requires fundamental structural change in the economy; increasing health and education spending can face sizeable capacity constraints; and infrastructure spending has a positive effect on growth as well as education and health outcomes.

This paper analyses economic implications and the transmission mechanisms of different options for creating and using fiscal space. For creating fiscal space, we consider prioritizing expenditures, raising revenue, and scaled-up aid. Fiscal space is used for increasing health and education spending, infrastructure spending, or both. The analysis takes place within the World Bank's MAMS model, which is a multisectoral real computable general equilibrium model that incorporates the Millennium Development Goals. The model has been calibrated for Burkina Faso, which serves as an illustrative country example. Some of the key results are that absorbing a more educated labor force requires fundamental structural change in the economy; increasing health and education spending can face sizeable capacity constraints; and infrastructure spending has a positive effect on growth as well as education and health outcomes.

Growth momentum in sub-Saharan Africa remains fragile, marking a break from the rapid expansion witnessed since the turn of the millennium. 2016 was a difficult year for many countries, with regional growth dipping to 1.4 percent—the lowest level of growth in more than two decades. Most oil exporters were in recession, and conditions in other resource-intensive countries remained difficult. Other nonresource-intensive countries however, continued to grow robustly. A modest recovery in growth of about 2.6 percent is expected in 2017, but this falls short of past trends and is too low to put sub-Saharan Africa back on a path of rising living standards. While sub-Saharan Africa remains a region with tremendous growth potential, the deterioration in the overall outlook partly reflects insufficient policy adjustment. In that context, and to reap this potential, strong and sound domestic policy measures are needed to restart the growth engine.

Economic growth in sub-Saharan Africa as a whole has fallen to its lowest level in 15 years, though with large variation among countries in the region. The sharp decline in commodity prices has severely strained many of the largest economies, including oil exporters Angola and Nigeria, and other commodity exporters, such as Ghana, South Africa, and Zambia. At the same time, the decline in oil prices has helped other countries continue to show robust growth, including Kenya and Senegal. A strong policy response to the terms-of-trade shocks is critical and urgent in many countries. This report also examines sub-Saharan Africa’s vulnerability to commodity price shocks, and documents the substantial progress made in financial develop, especially financial services based on mobile technologies.

Growth in sub-Saharan Africa has weakened after more than a decade of solid growth, although this overall outlook masks considerable variation across the region. Some countries have been negatively affected by falling prices of their main commodity exports. Oil-exporting countries, including Nigeria and Angola, have been hit hard by falling revenues and the resulting fiscal adjustments, while middle-income countries such as Ghana, South Africa, and Zambia are also facing unfavorable conditions. This October 2015 report discusses the fiscal and monetary policy adjustments necessary for these countries to adapt to the new environment. Chapter 2 looks at competitiveness in the region, analyzing the substantial trade integration that accompanied the recent period of high growth, and policy actions to nurture new sources of growth. Chapter 3 looks at the implications for the region of persistently high income and gender inequality and ways to reduce them.