Director of African Department International Monetary Fund (IMF), Abebe Aemro Selassie, said today at the Spring Meetings in Washington that economic growth in 2016 IMF estimate, only reached about one and a half percent, the weakest outcome in more than 20 years and well below the rate of population growth.
By Lucy Kamara
“While a number of countries continued to grow robustly the slowdown in growth has been fairly broad based, affecting about two-thirds of the countries in the region. That accounts for about four-fifths of regional GDP,” he said.
He noted that growth contrasts with the very robust growth rates the region was experiencing in recent years.
“We have also noticed that inflation has begun to accelerate in some countries, reflecting the widening of macroeconomic imbalances, some currency depreciation, and in a few cases, drought related food price increases.”
He noted further “looking ahead we see a rebound in growth, but only a modest one, so around two and a half percent in 2017. This will fall short of the recent trends and will be barely sufficient enough to deliver any per capita income gains. The uptick in growth is largely driven by one-off factors in the three largest economies, a recovery in oil production in Nigeria, higher public spending ahead of elections in Angola, and the fading of drought effects in South Africa.”
Selassie said Sub-Saharan Africa is a very diverse region and this aggregate number hides the fact that there are quite a few countries that continue to grow fairly robustly at five percent, even up to seven percent, particularly in West Africa and also some countries in East Africa.
“That said, going forward the outlook is subject to considerable downside risks from the external side.
“The global environment, while improving, remains a challenging one, particularly the financing constraints facing the region. Also, the scope for domestic shocks is fairly significant, either from insecurity or from some countries dealing with drought type situations.”
He also raised concern about the famine in South Sudan and the severe border security in Northeast Nigeria, which has created significant humanitarian concerns along with the region’s conflicts are behind some the problems.
“These need to be addressed as soon as possible, paving the way for stronger humanitarian systems to be put in place, but more importantly, economic conditions to revert back to normal,” he said.
Talking on economic policies, Selassie said overall weak economic outcomes have to do with insufficient policy adjustments in African countries, particularly the delay in the resource intensive countries.
He said in the countries hardest hit by the commodity price decline, especially oil exporters like Angola, Nigeria, and CEMAC, the budgetary revenue losses and balance of payment pressures are continuing.
“The delay in the much-needed reforms is creating uncertainty, holding back investment, and risks generating even deeper difficulties in the future,” he said, adding that the region needs renewed focus on macroeconomic stability.
“This we think is the prerequisite to realize the tremendous potential that the region has. For the hardest hit multi exporters fiscal consolidation will be very important with a strong emphasis on revenue mobilization. This is needed to halt the decline in international reserves and to offset the permanent revenue losses, especially in the CEMAC region. Elsewhere exchange rate flexibility is another issue. Wherever there is scope for exchange rate flexibility, I think that flexibility has to be used, including by eliminating the exchange restriction to help absorb the shocks that these countries are subject to.”