Navigating Sub-Saharan Africa’s Recovery Amid Greater Uncertainty
IMF News, April 12, 2019
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- Published: April 12, 2019
Overview and headline projections
- Sub-Saharan Africa’s economic recovery is set to continue, but along two tracks.
- Overall growth is set to pick up from 3 percent in 2018 to 3.5 percent in 2019, and stabilize at slightly below 4 percent over the medium term.
- The region must create enough jobs to absorb the 20 million new entrants to labor markets each year.
Duality of growth across countries
- Some 21 countries are expected to sustain growth at 5 percent or more in 2019.
- Remaining countries, mostly other resource-dependent economies, including the largest (Nigeria and South Africa) are set to face sluggish growth in the near-term.
External risk scenarios
- Heightened trade tensions, increased trade policy uncertainty in the United States, slower growth in China, lower commodity prices, and tighter global financial conditions could lower growth in sub-Saharan Africa by 2 percentage points this year.
- Commodity exporters, countries with stronger links to China and global markets, and countries with large refinancing needs would be most affected.
Weather and disaster-related pressures
- Cyclone Idai, which made landfall in March 2019 in southeast Africa—affecting more than 2.6 million people and decimating physical infrastructure and farmland—illustrates the vulnerability of the region to weather-related disasters.
Fiscal position and adjustment needs
- Fiscal adjustment has helped stabilize debt levels but more is still needed in many countries.
- The reduction in current debt ratios in some countries reflects the significant adjustment that has already taken place among oil exporting countries.
- Stabilizing or lowering debt ratios going forward requires more adjustment, consistent with existing fiscal consolidation plans.
Regional integration as a growth driver
- Once completed, the African Continental Free Trade Area agreement (AfCTA) will establish a market of 1.2 billion people with a combined GDP of 2.5 trillion dollars.
- AfCTA will significantly boost intra-African trade, particularly if non-tariff bottlenecks to trade are addressed.
Security, humanitarian needs, and spillovers
- Security-related spending in fragile states and humanitarian assistance, including in host countries, pose further constraints.
- While the incidence and intensity of conflict in recent years is lower than in the 1990s, the region remains prone to conflicts.
- Conflicts in the region are associated with a large and persistent decline in GDP per person, and have significant spillover effects on nearby regions and countries.
Source: Navigating Sub-Saharan Africa’s Recovery Amid Greater Uncertainty — IMF News, April 12, 2019.