Retailer stocks wares in Johannesburg, South Africa: most of sub-Saharan Africa weathered global economic crisis effects well (IMF photo)
PROSPECTS FOR AFRICA
Sayeh told a news conference in Washington the IMF expects Africa’s growth to reach close to 5 percent in 2010 and strengthen further in 2011, thereby coming fairly close to regaining levels seen before the global slowdown.
Speaking to reporters October 6 ahead of the 2010 IMF-World Bank Annual Meetings in Washington, Sayeh cautioned, however, that there are risks to this outlook. Large global imbalances need to be addressed, such as those between surplus and deficit countries on the one hand, and between public and private sector-led growth on the other.
In some parts of the world, notably emerging Asia and Latin America, the recovery is mature and self sustaining, Sayeh noted. But in other regions, the recovery remains fragile and dependent on policy support.
Opportunity to diversify
For sub-Saharan Africa, the faster growth of emerging market countries presents an opportunity to diversify trade and investment flows—which is already happening at an increasing pace, Sayeh said. “But seizing this opportunity requires strengthening African economic competitiveness, notably by improving public infrastructure.”
Taking advantage of faster emerging market growth also requires bringing economic policies back on an even keel by rebuilding the policy buffers that served so well during the crisis, Sayeh said. In particular, expansionary fiscal policies will need to be tempered to make sure that public finances return to a sustainable path and public debt levels remain manageable.
Most of sub-Saharan Africa weathered the global economic crisis quite well, Sayeh said. Some countries, middle income countries and oil producers in particular, were harder hit. But most low-income countries showed a welcome resilience to the turmoil affecting much of the rest of the world.
Buoyant commodity markets
Several factors account for this significant resilience. The absence of close financial integration insulated many low-income countries from the turmoil in global financial markets. And the quick rebound and continued buoyancy of commodity markets, driven not least by strong demand from Asia, also helped.
“But the key explanation in our view is that many countries in sub-Saharan Africa were in a much stronger economic position going into the crisis than they had been in the past,” Sayeh said. Inflation and debt were at low levels, and foreign exchange reserves were comfortably high in many countries.
This provided many countries with strong buffers to face the shock and, in some cases, respond with countercyclical policies. In particular, many countries were able to allow their fiscal deficits to widen, thereby cushioning some of the shock of the global economic downturn.
In exchanges with reporters, Sayeh welcomed progress in the regional integration objectives of the East African Community (EAC). She said the IMF has been discussing with EAC authorities how best to support those objectives, including by citing the experiences of other countries involved in the process of economic integration.
Sayeh also said that against a backdrop of constrained donor budgets, it is important for sub-Saharan Africa to improve its ability to attract private financing, including for infrastructure. This would require further progress on structural reforms and improving the business environment.
■ The IMF’s Regional Economic Outlook for sub-Saharan Africa will be published October 25.
