Sub-Saharan Africa is poised to maintain its economic expansion in the near term, but faltering US or European recovery could threaten exports, aid and capital flows, the International Monetary Fund (IMF) said on Tuesday.
In its latest World Economic Outlook update, the fund outlined the spillover risks for the region of any further deterioration of the global economic environment, although it had so far escaped any significant effects from the slowdown.
Reflecting these risks, the IMF revised a few notches downwards its real GDP growth forecast for sub-Saharan Africa for this year, putting it at 5.2% compared to 5.5% predicted in June.
The region’s GDP in 2012 was forecast to expand 5.8%, slightly down from the 5.9% seen in June.
World Bank chief Robert Zoellick said on Monday the ripple effects of the growing debt crisis in advanced economies were already starting to feed through to developing nations.
“A faltering US or European recovery could undermine prospects for exports, remittances, official aid and private capital flows,” the IMF warned for sub-Saharan Africa.
But if the rise in financial and economic instability in major advanced economies remained contained, the African region was set for continued expansion in the near term, it said.
Growth for low-income countries
Political uncertainty and weather shocks had the potential to dampen its growth prospects, however.
There were also considerable variations in the outlook across the region.
Average growth for low-income countries, largely shielded from the global crisis due to limited integration into world manufacturing and financial networks, was forecast at 6% this year, on the back of strong domestic demand and accelerating exports.
This would increase to 6.5% next year as Côte d’Ivoire’s economy returns to normal after the political disruption triggered by the 2010 elections, Kenya’s investment levels strengthen, and large oil and mining projects come online in Niger and Sierra Leone, the IMF said.
But the severe drought in the Horn of Africa had caused a humanitarian crisis in some economies and fuelled inflation.
Oil exports on the up
Middle-income countries were more vulnerable to a global slowdown and the recovery in South Africa, the region’s largest economy, was being complicated by this and other factors, such as a surge in unemployment, high household debt, low capacity utilisation and substantial real exchange rate appreciation.
Nevertheless, South Africa’s growth was expected to pick up to about 3.5% over the next 12 months, driven by private consumption and reinvigorated investment, the fund said.
Growth in sub-Saharan Africa’s oil exporting economies was projected to rise to 7.2% in 2012 from 6% this year, thanks to continued strength in domestic public investment spending and in spite of lower than originally projected oil prices, according to the IMF regional outlook.
This would include a strong rebound in oil production in Angola following a disruption in 2011.
The IMF recommended that with strong recovery underway, sub-Saharan Africa should return to long-standing priorities of improving policy and institutional frameworks, building resilience to commodity price swings and developing financial markets. — Reuters