IMF Projects Robust Growth in Sub-Saharan Africa, Amid Shifting Global ForcesPress Release No. 14/175
April 24, 2014
Introducing the April 2014 IMF Regional Economic Outlook: Sub-Saharan Africa, Ms. Antoinette Sayeh, Director of the IMF’s African Department commented today:
“The strong growth of recent years in sub-Saharan Africa region looks set to continue, accelerating from 4.9 percent last year to around 5½ percent in 2014, underpinned by high levels of infrastructure and mining investment. Growth in the region's Low-Income Countries remains higher still at some 6.9 percent in 2014.
“The outlook is nonetheless subject to more downside risks than in the recent past.
“Some of the favorable factors that have supported growth in the region have started to weaken. In particular, the shift in the composition of global demand—and of growth in some large emerging markets—is causing commodity prices to weaken. Tighter global financial conditions have also raised the cost of financing for many countries. Should these trends continue, they would likely act as a drag on growth in many countries in the region.
“More focus is called for on sustaining the macroeconomic stability that has underpinned high growth in recent years. For the region as a whole, fiscal deficits are elevated considering the prevailing high growth and still high commodity prices. In many cases, this reflects warranted high levels of public investment financed by appropriately concessional and sufficiently long-maturity loans. In a few cases, however, there has been a marked widening in fiscal deficits due to sharp increases in current spending, financed partly by volatile portfolio flows.
“Overall, our assessment is that the impact of these headwinds on activity in the region will be limited in most countries. But there is no room for complacency. Fiscal policy, in particular, needs to pay more heed to the business cycle. Wherever growth is doing well, there is need contain and gradually reduce deficits, with a particular emphasis on improving revenue mobilization. In those countries where macroeconomic imbalances are evident, there is urgent need for corrective policies. And of course restoring peace and stability remains the priority in countries like the Central African Republic and South Sudan where conflict is exacting a tremendous toll.”
Ms. Sayeh also highlighted some of the findings of one of the background chapters in the publication, Fostering Durable and Inclusive Growth. “In most countries, the strong economic growth of recent years has helped improve development outcomes and lower poverty. But this relationship is not automatic and, in some cases, has fallen short of the standards set by other fast-growing regions. For example, Mozambique has enjoyed generally as rapid growth as Vietnam in recent years, but the decline in poverty has been more pronounced in Vietnam. An important reason for this is Vietnam’s labor-intensive manufacturing-led growth coupled with strong improvements in agricultural productivity. Going forward, more emphasis is going to be necessary in those areas with significant scope for job creation—such as the agricultural sector and household enterprises. Policies that promote financial inclusion can play a role in facilitating job creation in these areas.