IMF Calls for Prompt Policy Action to Secure a Rebound in Growth

October 25, 2016

  • Regional Outlook: Sub-Saharan Africa faces slowest growth in 20 years, but quite a few countries still perform well
  • Sub-Saharan Africa growth in 2016 forecast at 1.4% is well below population growth rate
  • In African resource exporters’ economies, prompt, sustained policy adjustment is needed; oil producers hardest hit

Economic growth in sub-Saharan Africa in 2016 is set to slow to its lowest level in more than 20 years, the International Monetary Fund (IMF) said today. According to its October 2016 Regional Economic Outlook for Sub-Saharan Africa titled Multispeed Growth, average growth in the region is projected to be just 1.4 percent—well below population growth, and in sharp contrast to the high growth rates of recent years.

“The slowdown reflects two broad factors,” said Abebe Aemro Selassie, Director of the IMF’s African Department. “The external environment facing many of the region’s countries has deteriorated, notably with commodity prices at multi-year lows and financing conditions markedly tighter. In addition, the policy response in many of the countries most affected by these shocks has been delayed and inadequate, raising uncertainty, deterring private investment and stifling new sources of growth.”

Mr. Selassie cautioned, however, against a swing from the strong optimism of recent years to excessive pessimism today: “The fuller picture is one of multi-speed growth, with the aggregate growth number masking considerable diversity across the region. Indeed, most non-commodity exporting countries—representing close to half of the countries in the region—continue to perform well, with countries such as Côte d’Ivoire, Ethiopia, Senegal, and Tanzania foreseen to continue to grow at more than 6 percent. Most commodity exporters, however, are under severe economic strain. In particular, the near-term prospects have worsened significantly in oil exporters in recent months, as the pain from the initial oil price shock is now spreading to the entire economy, and the slowdown risks becoming deeply entrenched. Conditions in many non-oil commodity exporters also remain difficult, including in South Africa where output expansion is expected to stall this year.”

Looking ahead, Mr. Selassie noted that a modest pick-up in economic activity is likely, provided strong policy action is taken: “Subject to reforms being initiated quickly in the coming months, growth would recover close to 3 percent in 2017. But to make this happen, the hardest-hit countries, especially oil exporters, need to act promptly. Given the scale and persistent nature of the shock, and as existing buffers have been exhausted, a comprehensive three-pronged adjustment effort is needed urgently: Strong fiscal adjustment, enhanced social protection policies, and structural reforms to facilitate competitiveness and diversification. Further delays in addressing the elevated macroeconomic imbalances are certain to undermine growth prospects further and delay a robust and job-rich recovery.”

Mr. Selassie stressed that sub-Saharan Africa remains a region of immense economic potential, but that a comprehensive and internally coherent set of policies to reestablish macroeconomic stability is needed in the hardest-hit countries.

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