Sub-Saharan Africa

Time for a Policy Reset

April 2016

Reports and Related Links:
Africa REO

After an extended period of strong economic growth, many sub-Saharan African countries have been hit by a multiple of shocks—the sharp decline in commodity prices, tighter financing conditions, and a severe drought in southern and eastern Africa. Growth fell in 2015 to its lowest level in some 15 years and is expected to slow further to 3 percent in 2016. The growth performance, however, differs across countries, with most oil importers faring reasonably well. The region’s medium-term prospects remain favorable but many countries urgently need to reset their policies to reinvigorate growth and realize this potential. To this end, countries should adjust fiscal policies, and for those outside monetary unions, exchange rate flexibility, as part of a wider policy package, should also generally be part of the first line of defense. In the medium term, policies targeted at diversification and financial sector development could also strengthen resilience and boost growth.


Executive Summary

Chapter 1: Time for a Policy Reset

  • Economic activity in sub-Saharan Africa in 2015 slumped to its lowest level in some 15 years. Output expanded by 3.4 percent, just a little above population growth, down from 5 percent in 2014 and the still higher growth rates that were customary in recent years. The main reason for the slowdown is the sharp decline in commodity prices, which has placed a number of the region’s larger countries under severe strain, with a pronounced impact on the regionwide aggregate.
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Chapter 2: Weathering the Commodity Price Slump

  • The dependence on natural resource exports has made nearly half of sub-Saharan African countries vulnerable, one way or another, to the ongoing decline in commodity prices. But how much and how deeply countries will be affected remains an open debate.
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Chapter 3: Financial Development and Sustainable Growth

  • Financial development is important for promoting strong and stable economic growth in sub-Saharan Africa. It entails the wider use of existing financial instruments as well as the creation and adoption of new ones for intermediating funds and managing risk (Chami, Fullenkamp, and Sharma 2010). With external demand and financing conditions significantly worsening, and a much less favorable growth outlook for sub-Saharan Africa, identifying untapped or underutilized sources of growth and reducing its volatility have become even more urgent. It is well established in both the theoretical and empirical literature that financial development is generally good for growth. Although debates have revolved around whether financial development is an engine for growth or just a lubricant, whatever factor can significantly ameliorate growth prospects for the region is worth examining in detail.
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Statistical Appendix

  • Unless otherwise noted, data and projections presented in this Regional Economic Outlook are IMF staff estimates as of 25 March, 2016, consistent with the projections underlying the April 2016 World Economic Outlook. The data and projections cover 45 sub-Saharan African countries in the IMF’s African Department. Data definitions follow established international statistical methodologies to the extent possible. However, in some cases, data limitations limit comparability across countries.
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Publications of the IMF Africa Department, 2009-16

  • Books and monographs, departmental papers, policy papers, staff discussion notes, and working papers.
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