Sub-Saharan Africa’s economy is expected to grow by 5.25% in 2011, but if global growth slows, South Africa will be particularly hard hit, the International Monetary Fund (IMF) said on Wednesday.
The IMF predicted that the region’s economy would grow 5.75% in 2012.
“In particular, our projection for 2012 is highly contingent on global economic growth being sustained at about 4%,” according to an IMF report on sub-Saharan Africa’s economic outlook.
“If growth in advanced economies slows further and curtails global demand, the region’s ongoing expansion is likely to face significant headwinds, with South Africa and others that are more globally integrated likely to be affected the most.”
South Africa, a middle-income country with slower growth compared to the regional average, had yet to see its output and employment return to pre-crisis levels.
“Policies here should clearly remain supportive of output growth, and even more so if global growth sputters,” the IMF said.
Slower growth forecast
South Africa was forecast to grow at about 3.5% for 2011 and 2012.
“The recent global market turmoil, and its likely restraining impact on growth in advanced economies, is expected to limit growth in South Africa to about 3.5% this year and next.”
The IMF said the main economic threat to the region was the strong possibility that global growth would decelerate further, particularly in 2012.
“Growth in the advanced economies is expected to be only 1.5% in 2011 and 2% in 2012 — both figures having been revised downward significantly since June of this year.
“But even these growth levels are predicated on containment of the unresolved structural fragilities, particularly in the euro area periphery.”
Although advanced economies had become less important as a market for sub-Saharan African exports, they still accounted for nearly half of the region’s exports.
Decline in exports
Between 1990 and 2010, the share of sub-Saharan Africa’s exports to advanced economies declined from 78% to 52%.
Over the same period, the share of sub-Saharan Africa’s imports from those countries declined from 73% to 43%, the IMF said.
Demand from emerging trade partners helped the region weather the slowdown in economic activity in 2009 and 2010.
But, activity in these countries, such as China and India, was also expected to slow down.
“Should advanced economies’ growth slow further, our expectation is that by lowering import demand, this will lower growth in many of the large emerging markets.
“Under these circumstances, it would be prudent not to expect that either export demand or commodity prices will be as buoyant in the future as they have recently been.
No insulation expected
“The region should therefore not anticipate that its newer markets will be able to insulate its exports fully from the sputtering recovery in the advanced economies,” the IMF warned.
Non-traditional partners — led by the large economies of Brazil, India, and China — now account for about 50% of sub-Saharan Africa’s exports and almost 60% of its imports.
The IMF found there had been a substantial increase in trade within sub-Saharan Africa. Intra-regional trade now accounted for about 14% of sub-Saharan Africa trade, compared with only 7% in 1990.
The IMF said by 2010 South Africa had become an “engine of trade” in the region, accounting for 4% of total imports from the rest of sub-Saharan African and for 6% of total exports.
Investment reorientation
“A similar reorientation is also taking place in investment flows, with China now accounting for 16% of total foreign direct investment flows to the region; other emerging countries are also making considerable investments in sub-Saharan Africa.”
India and Brazil were also making substantial investments in the region.
“Whereas most Indian investment is concentrated in Mauritius, and Brazil’s investment is focused on Angola, Mozambique, and more recently Liberia, Chinese investment is present in most sub-Saharan African countries.
“Top destinations of Chinese investment in the region are South Africa, Nigeria, Zambia, Niger, Ethiopia, and the Democratic Republic of the Congo,” according to the report. — Sapa