Press Release No. 12/168

Press Release:IMF Outlook for Sub-Saharan Africa: “Sustained Growth amid Global Uncertainty”

May 14, 2012

The International Monetary Fund (IMF) today released the May 2012 Regional Economic Outlook: Sub-Saharan Africa . Ms. Antoinette Monsio Sayeh, Director of the IMF's African Department, commented on the report's main findings:

“Despite difficult external conditions, output in sub-Saharan Africa grew by 5 percent last year. Most countries shared in this solid expansion. Exceptions included South Africa, slowed by weak demand from Europe, and countries in western Africa affected by drought in the Sahel and civil conflict in Côte d’Ivoire. Consumer price inflation rose, particularly in eastern Africa, sparked in part by a surge in global food and energy prices.”

“For 2012, our expectation is that output growth in sub-Saharan Africa will remain strong. Although modest world growth is expected to constrain export expansion, one-off factors, including new resource production in several countries, will help nudge the region’s output growth rate up to 5½ percent. But there is variation in performance across the region, with output in middle-income countries tracking more closely the global slowdown and with some sub-regions adversely affected, at least temporarily, by drought. Inflation is projected to moderate, most notably in countries in eastern Africa that have tightened monetary policy.”

“This broadly favorable outlook is subject to clear downside risks because of global uncertainties, including the threat of renewed financial stresses in the euro area and the possibility of a surge in oil prices, triggered by geopolitical uncertainties. A weaker global economy would, of course, slow the pace of growth in sub-Saharan Africa. However, the resilience of the region’s economies over the course of the current global economic crisis provides confidence that solid growth can still be recorded under less favorable external conditions.”

“There are no “one-size-fits-all” policy recommendations. In countries where output growth is now strong and where budget deficits have widened significantly over the course of the crisis, governments should be taking the opportunity to rebuild fiscal positions and contain debt build-ups. But fiscal consolidation would be premature in countries where growth is weak and links to Europe are strong, unless borrowing capacity is eroded. Countries in the process of reducing elevated inflation rates will need to maintain monetary policy on the tight side until there is clear evidence of progress.”

Ms Sayeh also drew attention to key messages of the two background papers in the Regional Economic Outlook on banking systems in sub-Saharan Africa and on natural resource-exporting economies: “1) While most sub-Saharan African banking systems have proved resilient to recent episodes of global financial stress, the rapid pace of credit growth in some countries is a cause of concern and the steady expansion of pan-African banking groups in the recent past may in some cases have outpaced supervisory capacity. 2) Countries that rely significantly on exports of non-renewable natural resources have grown faster than economies less well-endowed with resources, but have also experienced significantly higher volatility in exports, revenue, and GDP growth. Macroeconomic management of resource revenue volatility has improved over time, but further progress can be made to strengthen macroeconomic policy frameworks and smooth government spending over the commodity price cycle.”

Download the full text of the April 2012 Regional Economic Outlook: Sub-Saharan Africa.