South Sudan Economic Outlook
- The drop in oil revenues is having a significant negative impact on the South Sudan’s economy; the level of GDP is estimated to have fallen by more than 5% in 2015, and the government net oil-revenue forecast for the 2015/16 fiscal year was only 17% of the previous year.
- The parties to the South Sudan civil conflict signed a Peace Agreement in August, although significant progress in its implementation has been slow.
- The humanitarian situation continues to deteriorate, with over 2.2 million people displaced by the continuing civil conflict as of November 2015.
Since independence in 2011, the political landscape in South Sudan has continued to be dominated by both internal and external threats to sustainable peace and stability. In December 2013, the country descended into protracted strife which has heightened uncertainty in the country. The parties to the conflict finally signed a peace agreement in August 2015 but timely implementation is a significant challenge. For instance, the time for the parties to form a transitional government expired. The conflict comes at a huge humanitarian cost. As of November 2015, over 2.2 million people, an increase of 200 000 since the beginning of 2015, have been displaced. Over 1.6 million people have been displaced internally while over 616 000 people have fled to neighbouring states. Severe food insecurity is expected to affect 4.6 million people this year, compared to 3.8 million last year, at the height of the lean season. The incidence of poverty has worsened from 44.7% in 2011 to more than 57% in 2015.
The challenges of the civil conflict are compounded by enormous economic and fiscal problems. The government budget is facing a huge shortfall caused by the sharp decline in oil revenues. South Sudan is one of the most oil-dependent countries in the world, with oil accounting for almost the totality of exports, around 60% of gross domestic product (GDP), and over 95% of the government revenues in previous fiscal years. Oil production in 2014-15 was 40% lower than projected in November 2013. In addition to the sharp fall in production, there has been a collapse of international oil prices, declining from close to 110 United States dollars (USD) per barrel in July 2014 to less than USD 35 per barrel in January 2016. The drop in oil revenues has led to a sharp reduction in the government’s revenues, preventing investment in development activities. Government net oil-revenue forecast for the 2015/16 fiscal year is only 17% of the previous year. In the last few years, GDP growth has been very erratic, driven by conflict and fluctuations in oil prices. By the African Development Bank estimates, after experiencing a 15.9% increase in 2014, growth is expected to experience a decline of -5.3% in 2015. The predictions are a small recovery in 2016 with 0.7% growth rate, and a revival in 2017 with 8.8% growth rate. However, the realisation of the forecast will depend on the recovery of oil prices and the implementation of the peace agreement.