## Executive Summary ## Source details **Canonical URL:** [Executive Summary](https://www.imf.org/-/media/files/publications/reo/afr/2017/october/pdf/sreo1017-exec.pdf) ## Other formats - [Markdown version](/-/media/files/publications/reo/afr/2017/october/pdf/sreo1017-exec.pdf.md) - [Structured JSON version](/-/media/files/publications/reo/afr/2017/october/pdf/sreo1017-exec.pdf.json) --- ### The quest for recovery - Growth expectations and drivers - Growth is expected to reach 2.6 percent in 2017. - The pickup reflects mainly one-off factors, notably a recovery in oil production in Nigeria and the easing of drought conditions in eastern and southern Africa, and a somewhat improved external environment. - While a third of the countries in the region continue to grow at 5 percent or more, in 12 countries, comprising over 40 percent of the region’s population, income per capita is expected to decline. - Growth in the region is expected to pick up further in 2018 and reach 3.4 percent, but ongoing policy uncertainty in Nigeria and South Africa hinders a stronger rebound, and growth is not expected to increase further in 2019. - Many of the faster growing economies continue to be driven by public spending, with debt levels and debt service costs rising. - External environment and vulnerabilities - Strengthening global growth, including in key trading partners such as China and the euro area, provides some positive tailwinds to growth in sub-Saharan Africa. - Increased appetite for yield has fostered a rebound in sovereign bond issuances by the region’s frontier economies; however, low commodity prices continue to weigh on growth prospects for commodity exporters. - Public debt as a share of GDP has increased since 2013 and is now above 50 percent of GDP in close to half of the region’s economies. - The number of low-income countries in debt distress or facing high risk of debt distress increased from 7 in 2013 to 12 in 2016. - All of the region’s frontier markets or other countries with credit ratings, except Namibia, have been downgraded below investment grade. - The debt increase has been driven by a widening in fiscal deficits, slow growth, the slump in commodity prices, and exchange rate depreciations in some countries. - While current accounts have improved and exchange market pressures eased somewhat, international reserves are below adequacy levels in many countries. - Many countries face risks from the disruption in correspondent bank relationships. - Dominant risks and policy priority - Reflecting the buildup of vulnerabilities, downside risks dominate. - Delays in implementing policy adjustments could reduce fiscal space for progrowth expenditures, crowd out private investment, and adversely impact the external sector. - Elevated public debt levels raise concerns about debt sustainability, while the spiraling banks-sovereign nexus could further strain the financial sector. - Key policy priority: implementing the fiscal consolidations planned in many countries, together with structural reforms to tackle constraints on growth. - Fiscal consolidation guidance - Fiscal consolidation needs are largest and most pressing in the oil-exporting countries. - In some cases (such as Angola) a considerable adjustment has already been made, mostly by cutting capital spending. - Going forward, oil-exporting countries should focus on raising noncommodity revenues and targeted reductions in recurrent spending. - Where consolidation is urgent, notably in oil-exporting countries, cuts in public investment may be unavoidable. - Other countries also need to initiate fiscal consolidation, albeit to a smaller extent, focusing on the composition and efficiency of spending. - Countries should protect key infrastructure spending and place priority on social spending on health, education, and social safety nets to minimize impacts on lower-income households. - Structural reform priorities - Implement structural reforms and seize opportunities to enhance growth above current projections through structural transformation and export diversification. - Priorities include improving access to credit, infrastructure, and the regulatory framework, and building a skilled workforce. ### The impact of fiscal consolidation on growth in sub‑Saharan Africa (Chapter 2) - Scope and main finding - Examines effects on output from changes in public expenditure and revenue in sub-Saharan African countries during 1990–2016. - Past fiscal consolidations—defined as periods during which fiscal positions improved based on spending cuts or noncommodity revenue mobilization—have typically been associated with negative effects on output. - Fiscal multipliers and heterogeneity - The estimated effects on output from changes in fiscal policy—fiscal multipliers—are generally smaller in sub-Saharan African economies than those identified in advanced or emerging market economies. - On average in sub-Saharan Africa, fiscal consolidations based on reducing public investment have had the largest contractionary effect on output. - Consolidations based on current spending cuts or on revenue mobilization have smaller effects on output. - The impact depends critically on country characteristics, the supporting policy environment, and the efficiency of spending and the strength of institutions. - Policy implications - Countries in the region should focus on revenue mobilization to mitigate the negative impact of fiscal consolidation on growth. - As revenue mobilization takes time, cuts in expenditures may be unavoidable in countries facing urgent adjustment needs. - When cuts are necessary, protect key infrastructure spending to avoid unduly constraining future growth prospects, and prioritize social spending on health, education, and social safety nets to minimize impacts on lower-income households. ### Economic diversification in sub‑Saharan Africa (Chapter 3) - Aggregate patterns and sectoral shifts - Structural transformation has been slower than in other regions at the aggregate level. - Workers have moved from low-productivity agriculture into higher-productivity manufacturing and services jobs, contributing to overall productivity growth. - Some resource-intensive and non-resource-intensive economies have achieved export diversification at a similar pace as global peers. - In contrast, the region’s oil exporters have seen increased specialization, reflecting higher oil prices and new production. - Growth linkages and determinants - Structural transformation and export diversification are positively associated with growth, in particular at early stages of development. - Cross-country regressions suggest macroeconomic stability, access to credit, good infrastructure, a conducive regulatory environment, a skilled workforce, and equality have been associated with higher economic diversification. - Country experiences and policy lessons - Country case studies highlight the heterogeneity of growth experiences. - A common element of successful policy interventions is that they build on a country’s endowments and expand underlying capabilities. - Addressing market failures can help, as can trade integration. *Regional Economic Outlook: Sub‑Saharan Africa — Executive Summary* --- _Source: https://www.imf.org/-/media/files/publications/reo/afr/2017/october/pdf/sreo1017-exec.pdf_