{ "title": "Growth in Sub-Saharan Africa is Diverging", "publication": "IMF News, November 14, 2024", "sourceUrl": "https://www.imf.org/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging", "canonical": "https://www.imf.org/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging", "overlayPath": "/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging/index.md", "summary": "Stagnating incomes in sub-Saharan Africa’s resource-intensive economies necessitate more effective fiscal management and broad-based structural reforms.", "authors": [ "Saad Quayyum" ], "publishDate": "2024-11-14", "sections": [ { "heading": "Overview", "content": "- Sub-Saharan Africa is home to nine of the world’s top twenty fastest-growing economies this year.\n- Headline regional averages mask a two-track growth pattern: a significant part of the region underperforms.\n- The analytical note accompanies the latest Regional Economic Outlook for sub-Saharan Africa and examines divergence between resource-intensive countries (RICs) and non-RICs." }, { "heading": "Recent growth patterns", "content": "- Over the past ten years, growth in sub-Saharan Africa’s resource-intensive countries (RICs) has slowed sharply, falling far below growth in non-RICs.\n- Incomes in RICs have essentially stagnated.\n- This contrasts with the decade leading up to 2014, when RICs experienced rapid growth in line with the region’s strong overall performance." }, { "heading": "Drivers of divergence", "content": "- Two main factors largely drove the post–2014 divergence between RICs and non-RICs:\n - A dramatic decline in commodity export prices around 2014–15 as the commodity “super-cycle” ended; the terms-of-trade decline has only been partially reversed since then.\n - Pre-existing structural vulnerabilities that exacerbated the impact of the terms-of-trade shock, including poor business environment, limited human capital, weak governance, and poor management of resource revenues." }, { "heading": "Structural weaknesses", "content": "- Weak governance, systemic corruption, and an unfavorable business climate reduce productivity and output; effects are most severe when commodity prices fall.\n- These weaknesses affect both the resource sector and prospects for economic diversification.\n- Example consequences cited:\n - Potential theft of oil production undermines productive efficiency and diverts resources from productive uses.\n - Weak governance impedes private sector investment more broadly.\n- Comparative note: fuel exporters outside the region, with generally stronger governance, have weathered the commodity price slump far better.\n- IMF staff estimate: for every one-percent worsening in a country’s terms of trade, medium-term growth is around ¼ percentage point higher in countries with smaller governance challenges." }, { "heading": "Fiscal dynamics and resource management", "content": "- Poor resource management reinforced the original shock via a pro-cyclical fiscal bias.\n- Fiscal policy in RICs is generally far more correlated with economic shocks, intensifying shock effects compared to other countries.\n- Typical pro-cyclical behaviors described:\n - During commodity price booms, many RICs (particularly fuel exporters) embark on costly capital projects that are often poorly planned and implemented.\n - Corresponding sharp reductions in capital spending occur when commodity prices fall.\n - Many fuel exporters provide sizable fuel subsidies; subsidy costs increase as oil prices rise, limiting the ability to save during booms and crowding out growth-friendly development spending.\n- Empirical fiscal point: the average oil-exporting country in sub-Saharan Africa has since 2011 consistently spent all its oil revenues in the year when they accrued." }, { "heading": "Development impact and urgency", "content": "- Reversing the divergence is a regional priority: RICs make up about two-thirds of sub-Saharan Africa’s GDP and population.\n- It is also a humanitarian priority: poor growth performance has translated into poor development outcomes—progress in tackling poverty in RICs effectively halted in 2014.\n- Child welfare statistics cited:\n - Compared to children in other parts of the region, a child born in a RIC today is expected to live 4 years less on average.\n - A child born in a RIC today is 25 percent more likely to live in poverty." }, { "heading": "Policy recommendations (The Way Forward)", "content": "- Establish a stable macroeconomic environment to reignite durable growth.\n- Adopt more prudent and consistently implemented fiscal frameworks to address poor resource management challenges and improve growth resilience.\n- Implement broad-based structural reforms to:\n - Strengthen governance.\n - Enhance the business environment.\n - Accumulate human capital.\n - Address infrastructure bottlenecks.\n- Prioritize diversification for fuel exporters in light of the global green-energy transition." }, { "heading": "Article metadata", "content": "- By Saad Quayyum, Nikola Spatafora, Sanghamitra Mukherjee, and Hamza Mighri\n- November 14, 2024\n\nSource: IMF News article \"Growth in Sub-Saharan Africa is Diverging.\"\n\n---\n\n\n References\n\n- REGIONAL ECONOMIC OUTLOOK FOR SSA\n- SUB-SAHARAN AFRICA'S JOB CREATION CHALLENGE\n- PODCAST ON SSA OUTLOOK\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging" } ], "bullets": [ "[Markdown version](/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging/index.md)", "[Structured JSON version](/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging/index.json)", "[Bundle manifest](/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging/bundle-manifest.json)", "Authors: Saad Quayyum", "Published: November 14, 2024", "Sub-Saharan Africa is home to nine of the world’s top twenty fastest-growing economies this year.", "Headline regional averages mask a two-track growth pattern: a significant part of the region underperforms.", "The analytical note accompanies the latest Regional Economic Outlook for sub-Saharan Africa and examines divergence between resource-intensive countries (RICs) and non-RICs.", "Over the past ten years, growth in sub-Saharan Africa’s resource-intensive countries (RICs) has slowed sharply, falling far below growth in non-RICs.", "Incomes in RICs have essentially stagnated.", "This contrasts with the decade leading up to 2014, when RICs experienced rapid growth in line with the region’s strong overall performance.", "Two main factors largely drove the post–2014 divergence between RICs and non-RICs:", "Weak governance, systemic corruption, and an unfavorable business climate reduce productivity and output; effects are most severe when commodity prices fall.", "These weaknesses affect both the resource sector and prospects for economic diversification.", "Example consequences cited:", "Comparative note: fuel exporters outside the region, with generally stronger governance, have weathered the commodity price slump far better.", "IMF staff estimate: for every one-percent worsening in a country’s terms of trade, medium-term growth is around ¼ percentage point higher in countries with smaller governance challenges.", "Poor resource management reinforced the original shock via a pro-cyclical fiscal bias.", "Fiscal policy in RICs is generally far more correlated with economic shocks, intensifying shock effects compared to other countries.", "Typical pro-cyclical behaviors described:", "Empirical fiscal point: the average oil-exporting country in sub-Saharan Africa has since 2011 consistently spent all its oil revenues in the year when they accrued.", "Reversing the divergence is a regional priority: RICs make up about two-thirds of sub-Saharan Africa’s GDP and population.", "It is also a humanitarian priority: poor growth performance has translated into poor development outcomes—progress in tackling poverty in RICs effectively halted in 2014.", "Child welfare statistics cited:", "Establish a stable macroeconomic environment to reignite durable growth.", "Adopt more prudent and consistently implemented fiscal frameworks to address poor resource management challenges and improve growth resilience.", "Implement broad-based structural reforms to:", "Prioritize diversification for fuel exporters in light of the global green-energy transition.", "By Saad Quayyum, Nikola Spatafora, Sanghamitra Mukherjee, and Hamza Mighri", "November 14, 2024", "[REGIONAL ECONOMIC OUTLOOK FOR SSA](https://www.imf.org/en/Publications/REO/SSA/Issues/2024/10/25/regional-economic-outlook-for-sub-saharan-africa-october-2024)", "[SUB-SAHARAN AFRICA'S JOB CREATION CHALLENGE](https://www.imf.org/en/Blogs/Articles/2024/11/12/the-clock-is-ticking-on-sub-saharan-africas-urgent-job-creation-challenge)", "[PODCAST ON SSA OUTLOOK](https://www.imf.org/en/News/Podcasts/All-Podcasts/2024/11/13/AFR-REO-OCT-2024)", "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging/index.md", "json": "/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging/index.json", "bundleManifest": "/en/news/articles/2024/11/14/cf-growth-in-sub-saharan-africa-is-diverging/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T03:25:52.363Z" }