- International Monetary Fund. African Dept.
- Published Date:
- October 2010
©2010 International Monetary Fund
Regional economic outlook : Sub-Saharan Africa : resilience and risks. -- Washington, D.C. : International Monetary Fund, 2010. – (World economic and financial surveys, 0258-7440)
p. ; cm.
Includes bibliographical references.
1. Economic forecasting – Africa, Sub-Saharan. 2. Africa, Sub-Saharan – Economic conditions. 3. Monetary policy – Africa, Sub-Saharan. 4. Africa, West – Economic conditions. 5. Fiscal policy – Africa, West. I. International Monetary Fund. II. Series: World economic and financial surveys.
HC800 .R445 2010
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Central African Economic and Monetary UnionCFA
Currency zone of CEMAC and WAEMUCPI
Consumer price indexEMBI
Emerging Market Bond IndexFDI
Foreign direct investmentG-7
Group of seven industrialized nationsGDP
Gross domestic productHIPC
Heavily Indebted Poor CountriesLIC
Multilateral Debt Relief InitiativeNPLs
Official development assistanceOECD
Organisation for Economic Co-operation and DevelopmentOPEC
Organization of the Petroleum Exporting CountriesPFM
Public Financial ManagementPPP
Real effective exchange rateREO
Regional Economic OutlookSSA
Total factor productivityVAR
West African Economic and Monetary UnionWEO
World Economic Outlook
The following conventions are used in this publication:
In tables, a blank cell indicates “not applicable,” ellipsis points (…) indicate “not available,” and 0 or 0.0 indicates “zero” or “negligible.” Minor discrepancies between sums of constituent figures and totals are due to rounding.
An en-dash (–) between years or months (for example, 2009–10 or January–June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2005/06) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2006).
“Billion” means a thousand million; “trillion” means a thousand billion.
“Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).
This October 2010 issue of the Regional Economic Outlook: Sub-Saharan Africa (REO) was prepared by a team led by Abebe Aemro Selassie under the direction of Saul Lizondo. The team included Valerie Cerra, Norbert Funke, Cheikh Gueye, Duval Guimarães, Robert Keyfitz, Tidiane Kinda, Alexis Meyer-Cirkel, Montfort Mlachila, Alun Thomas, Taufik Rajih, Gustavo Ramirez, Jon Shields, Amadou Sy, and Irene Yackovlev. Specific contributions were made by Calixte Ahokpossi, Alfredo Baldini, Jeromir Benes, Andrew Berg, Mai C.Dao, Vivien Foster (World Bank), Alexei Kireyev, Rainer Köhler, Rafael Portillo, Rupa Ranganathan (World Bank), and Cemile Sancak; with editorial assistance from Jenny Kletzin DiBiase. Production was by Natasha Minges, and the editing and production was overseen by Joanne Blake and Martha Bonilla of the External Relations Department.
Resilience through the global recession; economic recovery proceeding apace; some downside risks
Economic activity in sub-Saharan Africa is projected to expand by 5 percent in 2010 and 5½ percent in 2011. Should this prevail, economic growth in most countries in the region would have effectively bounced back to close to the high levels registered in the mid-2000s.
The region’s resilience through the global financial crisis owes much to sound economic policy implementation. Before the 2007–09 global shocks, most of the region’s economies were in good shape: steady growth, low inflation, sustainable fiscal balances, rising foreign exchange reserves, and declining government debt. When the shocks hit, countries were able to use fiscal and monetary policies nimbly to dampen the adverse effects of the sudden shifts in world trade, prices, and financial flows.
Growth in 2010 and 2011 is expected to be broad based. Domestic demand is expected to remain strong on the basis of rising real incomes and sustained private and public investment. In addition, exports are expected to benefit from the increased reorientation of trade toward fast-growing markets in Asia.
Nevertheless, the legacy of the global financial crisis is evident in macroeconomic indicators. Unemployment has risen substantially in countries with more developed manufacturing sectors. Fiscal balances have deteriorated, particularly in middle-income countries and oil exporters. Exports have also not yet climbed back to precrisis levels. Credit growth remains subdued.
Risks remain weighted on the downside. Globally, the recovery in advanced countries still looks shaky and financing flows could be jeopardized by fiscal retrenchment in these countries. Domestically, the busy election calendar (elections are scheduled in 17 countries) could delay required reforms.
Policies to sustain the recovery
A shift in the emphasis of fiscal policy from near-term output stabilization towards medium-term financial and debt sustainability considerations is increasingly necessary in many countries. With growth in most countries in the region now reverting to close to potential, even where fiscal deficits have risen primarily because of automatic stabilizers, spending and revenue trajectories should now be determined by medium-term fiscal objectives. Continued fiscal support is likely warranted only in a handful of economies where growth is set to remain below potential and which do not face debt sustainability risks.
Monetary policy can more readily remain in wait-and-see mode. As in the case of fiscal policy, national authorities have made adroit use of monetary instruments in recent years, including drawing on foreign reserve buffers, in the case of fixed exchange rates, or allowing flexibility, in the case of floating rates, to offset the impact of external shocks. These have proved more effective than previously assumed in influencing domestic monetary conditions. As long as inflationary pressures and credit growth stay low, there is little urgency to reverse interest rate cuts.
Over the long term, improving public services and infrastructure, strengthening financial systems, and maintaining an open business climate should remain paramount policy objectives. In the first regional case study to be published in this series of Regional Economics Outlooks, the relatively slow growth of countries in the West African Economic and Monetary Union over the last 15 years is seen to be associated with somewhat weaker policy environments and recurrent political instability. More robust fiscal frameworks can help to maintain macroeconomic stability while directing resources toward priority spending needs.