Sub-Saharan Africa: The Path to Recovery

IMF News, October 30, 2017

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Growth is expected to pick up to 2.6 percent in 2017 from last year’s 1.4 percent.
A recovery in oil production and a good harvest in Nigeria, as well as the easing of tensions in the Niger Delta, accounts for more than half of the additional growth.
The global environment has been supportive, with strengthening growth momentum in the largest economies, commodity prices off their troughs, and improved access for sub-Saharan African economies to international capital markets.
Despite the pickup, income per capita will barely increase in the region; in 12 of the 45 sub-Saharan African countries, home to about 40 percent of the region’s population, or 400 million people, per capita incomes are expected to decline.

2017: 2.6 percent.
2016 (previous year): 1.4 percent.
Beyond 2017: growth is expected at about 3½ percent, below the 5 percent mark achieved in the first half of the decade.
One third of sub-Saharan African countries continue to grow at about 5 percent.

Public debt and fiscal pressures:
- At the end of 2016, public debt exceeded 50 percent of GDP in nearly half of the sub-Saharan African countries.
- Debt servicing costs absorb more than 60 percent of government revenues in Angola, Gabon, and Nigeria.
- Driving factors: large fiscal deficits, slowdown in growth, and in some countries, exchange rate depreciations.
- Any further postponement of fiscal adjustments will likely increase public debt above sustainable levels given the recent pace of debt accumulation.
Financial sector strains:
- Increasing use of domestic banks to finance deficits is constraining the availability of credit to the private sector.
- In many countries, banks’ liquidity and solvency indicators have deteriorated, and non-performing loans have increased.
External buffers:
- Despite some narrowing in current account deficits, international reserves are now below adequacy levels in many countries, especially those with fixed exchange rate regimes.
Political uncertainty:
- Political uncertainty in some of the region’s largest economies, such as Nigeria or South Africa, is weighing on consumer and investor confidence.

Overarching priorities:
- Address fiscal vulnerabilities.
- Unlock constraints to growth.
Addressing fiscal vulnerabilities:
- Most sub-Saharan African countries are planning fiscal adjustments to contain the recent increase in debt.
- Fiscal adjustment should, wherever possible, be undertaken in a manner that limits the adverse effect on growth while preserving fiscal space for priority spending.
- Fiscal consolidation is most pressing in oil-exporting countries.
- Other countries should use the opportunity to focus on raising revenues and making room for outlays on health and education, and other spending that have positive social impact and long-term growth effects.
Boosting growth and diversification:
- Address infrastructure deficits through well planned efficient investments, even in an environment of limited fiscal space.
- Complement infrastructure investment with reforms to improve governance, including rule of law and government effectiveness.
- Economic diversification strategies should build on a country’s existing strengths and be tailored to tackle specific challenges.
- Sectoral policies will likely be more successful if supported by efforts to:
- enhance macroeconomic stability,
- improve education outcomes,
- bolster governance and transparency in regulation,
- deepen financial markets.

Sub-Saharan Africa: The Path to Recovery — October 30, 2017.