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World Economic and Financial Surveys

Regional Economic Outlook:
Sub-Saharan Africa

Recovery and New Risks

April 2011

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Sub-Saharan Africa's economic recovery is well under way, although among country groups there is variation in the speed of the recovery. In most of the region's low-income countries and among the seven oil exporters growth is almost back to precrisis levels. However, in the region's middle-income countries, including South Africa, the recovery has been more gradual. This Regional Economic Outlook describes the impact of recent economic developments---sharp increases in food and fuel prices will need fiscal interventions targeting the poor, while higher oil prices will be a boon to some countries and adversely affect others. Policy adjustments are needed to move away from the supportive stance of the last few years but should be balanced against the need to alleviate the impact of rising food prices on poor households.

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Contents

Preface
Abbreviations
Main Findings
 
1. Recovery and New Risks
  Introduction and Summary
  How and Where Has Output Recovered from the Impact of the Crisis?
  Has Fiscal Policy Started to Pay Heed to the Recovery?
  What Are the Implications of the Resurgence in Food and Fuel Prices?
  Policy Priorities Going Forward
 
2. Capital Inflows to Frontier Markets in Sub-Saharan Africa
  Introduction and Summary
  The Nature and Volume of Flows to Sub-Saharan African Frontier Markets in a Global Context
  Other Private Flows to Frontier Markets
  How Different Is the Recent Experience of Sub-Saharan Africa’s Frontier Markets?
  Long-Term Determinants of Private External Financing in Sub-Saharan Africa
  Policy Recommendations
 
3. The East African Community: Taking Off?
  Introduction and Summary
  The EAC Growth Experience
  How Does the East African Community Compare with Other Fast Growers? Benchmarking East African Community Growth
  New Challenges and New Opportunities
 
Statistical Appendix
References
 
Publications of the IMF African Department, 2009–2011
 
Boxes
1.1. Why Has South Africa’s Recovery from the Recession Been Subdued?
1.2. How Unique Is Sub-Saharan Africa’s Growth Surge of the Last Decade?
1.3. An Adverse Oil Shock Scenario
2.1. What Are Frontier Markets?
2.2. Foreign Direct Investment to Sub-Saharan Frontier Markets
2.3. Do Sub-Saharan Africa Exchange Rates Respond to Changes in Foreign Interest Rates?
3.1. East African Community—An Overview
3.2. The East African Community Common Market: Achievements and Remaining Challenges
3.3. Kenya: Mobile Money and Financial Sector Deepening
3.4. Competition in East African Community Banking Systems: Evidence from a Price-Setting Behavioral Model
3.5. Shifting Trends in EAC Trade
3.6. Regional Bond Market Development in West Africa
 
Tables
1.1. Sub-Saharan Africa: Macroeconomic Aggregates, 2004–12
1.2. Sub-Saharan Africa: Contributions to Real GDP Growth, 2004–11
2.1. Developments in Private Capital Flows during 2010
2.2. Factors in Attracting Private Capital Inflows
2.3. Formal Evidence on Determinants of Capital Inflows
2.4. Comparison of Key Indicators, 2009
2.5. Current Macroeconomic Indicators
3.1. Top 20 Fastest-Growing Economies in 2005–09
 
Figures
1.1. Sub-Saharan Africa: Trends in Output among Low-Income and Oil-Exporting Countries
1.2. Sub-Saharan Africa: Trends in Output among Middle-Income Countries
1.3. Changes in Inflation and Policy Rates
1.4. Sub-Saharan Africa: Broad Money and Private Sector Credit Growth, December 2005–September 2010
1.5. Nominal Effective Exchange Rate Change, January 2009 versus January 2011
1.6. Sub-Saharan Africa: External Account Indicators
1.7. Sub-Saharan Africa: Total Revenue Excluding Grants, 2000–12
1.8. Sub-Saharan Africa: Real Government Expenditure Growth, 2004–11
1.9. Real Government Expenditure Growth, 2011
1.10. Sub-Saharan Africa: Overall Balance Excluding Grants, 2000–12
1.11. Sub-Saharan Africa: Change in Fiscal Balance and Net Present Value of Public Debt
1.12. World Commodity Price Index
1.13. Sub-Saharan Africa: Food Inflation Rate
1.14. Sub-Saharan Africa: Food Inflation
1.15. Relationship between Domestic and International Food Prices
1.16. Trade Balance Effects of Commodity Price Changes in 2011
1.17. Sub-Saharan Africa: Real Policy Interest Rate
1.18. Sub-Saharan Africa: Relationship between CPI Inflation and Food and Fuel Inflation Rates, 2000–10
2.1. Private vs. Official Financing to Sub-Saharan African Countries
2.2. Net Private Capital Flows to Emerging and Developing Economies
2.3. Net Private Capital Flows to Sub-Saharan African Countries
2.4. Net Portfolio Investment in Emerging and Developing Economies
2.5. Sub-Saharan Africa Frontier Markets: Portfolio Investments
2.6. Portfolio Investment Net
2.7. Average Stock of Portfolio Investment Liabilities
2.8. Stock of Portfolio Investment Liabilities
2.9. Sub-Saharan Africa Frontier Markets: External Bond Issuance
2.10. Other Frontier Markets: External Bond Issuance
2.11. Morgan Stanley Capital International (MSCI) Indices
2.12. Country Stock Market Indices
2.13. Sub-Saharan Africa Frontier Markets: Foreign-Held Equity Securities
2.14. Sub-Saharan Africa Frontier Markets: Consolidated Foreign Bank Claims
2.15. Average FDI as Percent of GDP, 1991–2009
2.16. FDI as Percent of GDP
2.17. Foreign Ownership of Government Securities
2.18. Global Indicators
2.19. Real GDP Growth
2.20. Policy Rates Across Regions
2.21. Change in Policy Rate Spreads, end-2008 to end-September 2010
2.22. Average 91-Day Yield
2.23. Evolution of Average Exchange Rates Against the U.S. Dollar
2.24. Mauritius: Portfolio Investment by Destination, 2009
2.25. Mauritius: Portfolio Liabilities by Creditor, 2009
2.26. Mauritius: Portfolio Liabilities, 2009
2.27. Coefficient of Variation for Nominal Effective Exchange Rate, 12-Month Period
2.28. Sub-Saharan Africa Frontier Markets: Foreign Currency Deposits in the Banking System
2.29. Effective Exchange Rate Volatility and Dollarization, 2009 vs 2010
2.30. Foreign Holdings of Government Securities, 2005:Q1–2010:Q3
3.1. Real GDP Growth
3.2. Cumulative Growth in Real per Capita GDP
3.3. Inflation since Growth Turnaround
3.4. Inflation since Growth Turnaround
3.5. East African Community: Macroeconomic Stabilization
3.6. Total Factor Productivity
3.7. Exports since Growth Turnaround
3.8. Export Concentration
3.9. East African Community: Business Environment
3.10. East African Community: Investment and Savings
3.11. SGs: Investment and Savingsn
3.12. Grants
3.13. Inward Foreign Direct Investment
3.14. Misalignment from Equilibrium Exchange Rate (3-year moving averages)
3.15. Financial Deepening
3.16. Private and Official Flows to the East African Community
3.17. Exchange Rate Volatility