Sub-Saharan Africa in 2016 recorded its worst growth rate in more than two decades, the International Monetary Fund (IMF) has stated.
In 2016, growth slowed in about two-thirds of the countries in the region, accounting for 83 percent of regional Gross Domestic Product (GDP) – and is estimated to have reached just one and half percent, the IMF said in its 2017 first bi-annual Regional Economic Outlook for the sub-region titled: Sub-Saharan Africa – Restarting the Growth Engine.
“The sub-Saharan African economic outlook remains clouded. Growth slowed sharply in 2016 averaging 1.4 percent,” the report presented by IMF Ghana Resident representative, Natalia Koliadina, added.
This marked the region’s worst performance in more than two decades, it indicated, adding that growth momentum in Sub-Saharan Africa “remains fragile.”
“Even the modest rebound to two-and-half percent 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,” it said.
According to the report, the deteriorated outlook was partly as a result of delayed and still limited policy adjustments, with an ensuing increase in public debt, declining international reserves, and pressures on financial systems, as well as fall in commodity prices.
Subdued Outlook
“Nonetheless, the underlying regional momentum remains weak, and at this rate, sub-Saharan African growth will continue to fall well short of past trends and barely exceed population growth,” the 111-page report noted.
It added that “with policies behind the curve, pressures on sovereigns rising, and spillovers to the private sector intensifying, the near-term outlook for growth in the region is foreseen to remain subdued.”
Tighter financing
It said financing to the region was expected to further tighten in 2017, saying external financial conditions for frontier economies in the region have loosened from the peaks reached in early 2016, but they still remain tighter than conditions for emerging markets in the rest of the world.”
“They could rapidly tighten further against the backdrop of fiscal policy easing and monetary policy normalization in the United States,” it said.
Inflation
According to the report, the inflation outlook was expected to continue to be extremely heterogeneous across the region.
On the one hand, inflationary pressures are foreseen to remain in large oil exporters – Angola, Nigeria – against the backdrop of unresolved external imbalances.
Similarly, it mentioned that Burundi, Democratic Republic of Congo, Ghana, Malawi, Mozambique, and Sierra Leone are still foreseen to register inflation rates in excess of 10 percent.
Suggestions
To help address the problems, the IMF suggested in the report that countries in the region should fashion out “sound domestic policies, including fiscal policy that prevents excessive public debt accumulation, monetary policy geared toward low inflation, outward-oriented trade policies, and structural policies that reduce market distortions.
“In light of the less supportive external environment, these findings reinforce the call made in the first chapter for a strong domestic policy response to revive growth where it has faltered, and to sustain growth where it remains relatively strong,” the three-chapter report, which also explored the role of the informal economy in Sub-Saharan Africa, noted.
“Additional policy actions are therefore urgently needed to address growing imbalances and ensure macroeconomic stability – both to restore the conditions for strong growth and sustainable growth in resource-intensive countries and to preserve the existing momentum elsewhere.
By Melvin Tarlue