## External Risks Threaten Sub-Saharan Africa's Steady Recovery

_IMF News, October 11, 2018_

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## Bibliographic details
- Published: October 11, 2018

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### Economic recovery and growth projections
- Growth is projected to increase from 2.7 percent in 2017 to 3.1 percent in 2018.
- Recovery reflects a combination of domestic policy adjustments and a supportive external environment.
- It is not a single story: oil exporters such as Angola and Nigeria experienced sharp declines after the 2014 commodity price shock and have recovered to levels well below pre-2014; non-resource-intensive countries continue to sustain high growth.

### Fiscal consolidation and revenue mobilization
- The average fiscal deficit for the region is set to shrink from 4.2 percent of GDP in 2017 to 3.3 percent in 2018.
- To date, deficit reduction largely reflects:
  - the oil price rebound for oil exporters, and
  - sharp cuts in capital spending in a number of countries.
- Progress on improving domestic revenue mobilization has been elusive and remains far short of the region’s potential.
- Further revenue-based adjustment is needed to reduce debt vulnerabilities and generate resources for development.

### Debt vulnerabilities
- In 2017, 15 low-income sub-Saharan African countries were classified at high risk of debt distress or in debt distress:
  - High risk of debt distress or in debt distress: Burundi, Cameroon, Cabo Verde, Central African Republic, Ethiopia, The Gambia, Ghana, São Tomé and Príncipe, and Zambia.
  - In debt distress: Chad, Republic of Congo, Eritrea, Mozambique, South Sudan, and Zimbabwe.
- Debt dynamics for these countries mainly reflect large primary deficits and, in several cases, exchange rate depreciations.
- Debt reduction mainly reflects adjustment in oil exporters.
- Improving debt management frameworks could help better manage risks.

### External risks to the outlook
- The global economy is entering a period of unusually elevated policy uncertainty with significant risks that could adversely impact many countries in the region.
- Escalating trade conflicts threaten to derail the global economic recovery in the near term and dampen medium-term growth prospects.
- Trade tensions between the United States, other major advanced economies, and China could entail a cumulative loss of GDP in sub-Saharan Africa of up to 1½ percent of GDP during 2018–21.
- Sub-Saharan African countries most affected by the trade war would be the commodity exporters and those countries (commodity exporters and importers alike) that are more integrated in global markets.
- Increased exposure to an unexpected tightening of global financial conditions:
  - Tighter global financial conditions could result from faster-than-envisaged monetary policy normalization in advanced economies or a sudden shift in investors’ sentiment.
  - Frontier markets have weathered bouts of volatility that hit a few large emerging markets since mid-April 2018.
  - Higher U.S. interest rates and a stronger dollar heighten risks, and the probability of a large reversal in foreign flows in sub-Saharan Africa is significantly higher as U.S. interest rates go up.

### Policy actions and priorities
- Medium-term growth of 4 percent is too low for sub-Saharan Africa.
- The region needs to raise growth to create the additional 20 million jobs per year needed to absorb new entrants to labor markets.
- Steps to create strong, sustained, and inclusive growth include:
  - Deepening trade and financial integration (including in the context of the African Continental Free Trade Area).
  - Facilitating the movement of labor and capital through a better allocation of public spending.
  - Embracing opportunities from the 4th industrial revolution by promoting digital connectivity and a flexible education system.
  - Removing market distortions.
  - Undertaking policies that will foster private investment and risk-taking.
- Policies need to focus on reducing vulnerabilities and strengthening policy frameworks to shield the recovery against shocks.

*Source: External Risks Threaten Sub-Saharan Africa's Steady Recovery, IMF News, October 11, 2018*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Regional Economic Outlook for Sub-Saharan Africa](https://www.imf.org/en/Publications/REO/SSA/Issues/2018/09/20/sreo1018)
- [Background paper](https://www.imf.org/en/news/articles/2018/10/09/-/media/Files/Publications/REO/AFR/2018/October/pdf/sreo1018background%20)
- [Read the press release](https://www.imf.org/en/News/Articles/2018/10/10/pr18387-afrreo-imf-calls-for-policy-action-to-deliver-growth)
- [Listen to the podcast (French)](https://www.imf.org/en/news/articles/2018/10/09/%20http://traffic.libsyn.com/imfpodcast/AFR_REO_OCT_2018-FR_Master_Mix_1.mp3)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2018/10/09/na101118-external-risks-threaten-sub-saharan-africas-steady-recovery_