Growth momentum in sub-Saharan Africa remains fragile, the International Monetary Fund (IMF) says, noting that, with policy response being "behind the curve", pressures on sovereigns rising and spillovers to the private sector intensifying, the near-term outlook for growth in the region is likely to remain subdued.
The modest rebound in aggregate growth to 2.6% this year in its baseline is expected to be driven to a large extent by a mitigation of adverse circumstances that caused growth to slump sharply in the largest countries in the region in 2016.
Last year, growth slowed in about two-thirds of the countries in the region – accounting for 83% of regional gross domestic product (GDP) – and was estimated to have reached just 1.5%.
“This marked the region’s worst performance in more than two decades. Even the modest rebound . . . expected in 2017 will be to a large extent driven by one-off factors in the three largest countries – a recovery in oil production in Nigeria, higher public spending ahead of elections in Angola, and the fading of drought effects in South Africa – combined with modest improvements in their terms of trade,” the IMF outlined in its ‘Regional Economic Outlook for sub-Saharan Africa’ report.
It added that, at this rate, sub-Saharan African growth would continue to fall well short of past trends and barely exceed population growth.
The organisation further highlighted that sub-Saharan Africa started 2017 from a weak position, with conditions in resource-intensive countries remaining fraught, including continued political uncertainty in South Africa.
The average fiscal deficit in sub-Saharan Africa also continued to widen in 2016, reaching -4.5% of GDP following levels of -4.1% in 2015 and -3.5% in 2014. These developments reflected continued pressures on revenues that were generally not fully offset by expenditure cuts.
Mirroring the policy response to external pressures and the pass-through of currency depreciations, inflation continued to rise in 2016 in some of the key commodity exporters, remaining slightly above the upper target band in South Africa.
AFRICA RECOVERING 101
To bolster economic growth, the IMF noted that countries in the region required decisive efforts at a time when most of the factors known to adversely affect the duration of growth episodes in the past – including unfavourable external conditions, and deteriorating macroeconomic conditions – were now present in most countries in the region.
It noted that local economies, therefore, needed to boost domestic revenue mobilisation to create space for growth-enhancing spending; leverage financial development to broaden the tax base; strengthen financial supervisory capacity and increase efforts to strengthen cross-border collaboration to ensure effective consolidated supervision, in particular for Pan-African banks; and to safeguard financial stability.