Title Page
World Economic and Financial Surveys
Regional Economic Outlook
Sub-Saharan Africa
Recovery Amid Elevated Uncertainty
APR 19
INTERNATIONAL MONETARY FUND
Copyright
©2019 International Monetary Fund
Cataloging-in-Publication Data
Names: International Monetary Fund, publisher.
Title: Regional economic outlook. Sub-Saharan Africa : recovery amid elevated uncertainty.
Other titles: Sub-Saharan Africa : recovery amid elevated uncertainty. | World economic and financial surveys.
Description: Washington, DC : International Monetary Fund, 2019. | Apr. 2019. | Includes bibliographical references.
Identifiers: ISBN 9781484396865 (paper)
ISBN: 9781498304139 (Web PDF)
Subjects: LCSH: Africa, Sub-Saharan—Economic conditions. | Economic development—Africa, Sub-Saharan. | Economic forecasting—Africa, Sub-Saharan.
Classification: LCC HC800 .S83 2019
The Regional Economic Outlook: Sub-Saharan Africa is published twice a year, in the spring and fall, to review developments in sub-Saharan Africa. Both projections and policy considerations are those of the IMF staff and do not necessarily represent the views of the IMF, its Executive Board, or IMF Management.
Publication orders may be placed online, by fax, or through the mail:
International Monetary Fund, Publication Services
P.O. Box 92780, Washington, DC 20090 (U.S.A.)
Tel.: (202) 623–7430 Fax: (202) 623–7201
E-mail : publications@imf.org
Contents
Abbreviations
Acknowledgments
Executive Summary
1. Two-Track Recovery Amid Elevated Uncertainty
Macroeconomic Developments and Prospects
Risks to the Outlook
Policies
References
2. The Economic Consequences of Conflicts
Prevalence and Intensity of Conflicts
Conflict and Economic Growth
Spatial Impact of Conflict
Fiscal Implications of Conflict
Conclusion
References
3. Is the African Continental Free Trade Area a Game Changer for the Continent?
Regional Trade Integration in Africa: Key Patterns
How Can the AfCFTA Support Regional Trade Integration in Africa?
Implications of the AfCFTA for African Countries: Welfare, Income Distribution, and Fiscal Revenue
Summary and Policy Implications
References
Statistical Appendix
Background Paper and Expanded Statistical Appendix Online.
www.imf.org/~/media/Files/Publications/REO/AFR/2019/April/English/backgroundpapers.ashx?la=en
Online Expanded Statistical Appendix Tables; Online Annex for Chapter 2—The Economic Consequences of Conflicts; Online Annexes for Chapter 3—Opportunities and Challenges of the AfCFTA; Publications of the IMF African Department 2013–19
Boxes
1.1. Transitioning to International Financial Reporting Standard 9
1.2. Financial Development and Mobile Money Growth in Sub-Saharan Africa
1.3. Sub-Saharan African Demographic Trend and Gender Gaps in Education
2.1. The Impact of Conflict on Women and Children
Table
2.1. Sub-Saharan Africa: Share of Countries in Conflict by Geographic Region and Economic Classification
List of Appendix Tables SA1—SA8:
SA1. Real GDP Growth and Consumer Prices, Average
SA2. Overall Fiscal Balance, Including Grants and Government Debt
SA3. Broad Money and External Current Account, Including Grants
SA4. External Debt, Official Debt, Debtor Based and Reserves
Figures
Chapter 1
1.1. Sub-Saharan Africa: Real GDP per Capita, 1990–23
1.2. Global Growth Projections: Current versus October 2018
1.3. Real Commodity Price Indices: Volatility of Changes in Price Indices, 2000–08 and 2009–17
1.4. Sub-Saharan Africa: Goods Terms of Trade Growth, 2013–21
1.5. Sub-Saharan African Frontier and Emerging Market Economies: Volatility of Equity and Bond Flows, 2005–11 and 2012–18
1.6. Sub-Saharan Africa: Real GDP Growth, 2013–23
1.7. Sub-Saharan Africa: CPI Inflation
1.8. Sub-Saharan Africa: Savings-Investment Balance, 2014–19
1.9. Sub-Saharan Africa: Reserve Buffers
1.10. Sub-Saharan Africa: Overall Fiscal Balance, 2018–19
1.11. Cyclicality of Fiscal and Terms of Trade Cycles, 2000–17
1.12. Sub-Saharan Africa: Medium-Term Fiscal Plans, 2018–23
1.13. Sub-Saharan Africa: Debt Risk Status for PRGT Eligible Low-Income Developing Countries, 2008–17
1.14. Sub-Saharan Africa: Public Debt to GDP, 2011–23
1.15. Sub-Saharan Africa: Nonperforming Loan Ratio
1.16. Sub-Saharan Africa: Nonperforming Loan Ratio and Real Nonfinancial Private Credit Growth
1.17. Sub-Saharan Africa: Regulatory Capital Ratio
1.18. Trade Tensions, China Slowdown, and Global Financial Conditions
1.19. Sub-Saharan Africa and China Trade and Investment Flows, 2005–16
1.20. Net Financial Flows: Estimated Cumulative Impact of External Factors
1.21. Sub-Saharan African Frontier and Emerging Market Economies: Maturity of International Sovereign Bonds
1.22. Impact of Droughts on GDP
1.23. Sub-Saharan Africa: Cumulative Impact of Intense Conflicts on GDP
1.24. Sub-Saharan Africa: Interest Payments
1.25. Sub-Saharan Africa: Public Investment Incremental Capital Output Ratio and Public Debt.
1.26. Sub-Saharan Africa: Exchange Market Pressure, 2017–18
1.27. Real GDP Growth Decomposition
1.28. Selected Emerging Market and Developing Regions: Major Constraints to Business Operations
1.29. Sub-Saharan Africa: Labor Productivity and Earnings Relative to Government Sector
Chapter 2
2.1. Selected Regions: Share of Countries in Conflict
2.2. Number of Countries in Conflict, 1989–2017
2.3. Total Conflict-Related Deaths, 1989–2017
2.4. Sub-Saharan Africa: Countries in High-Intensity Conflict, 1989–2017
2.5. Number of Conflict-Related Deaths in Sahel Region, 1989–2017
2.6. Distribution of Conflict-Related Deaths in Sahel Region, 2011–17
2.7. Sub-Saharan Africa: Nature of Conflict
2.8. Sub-Saharan Africa: Conflict Exit Probabilities
2.9. Persons of Concern from Sub-Saharan Africa,1980–2017
2.10. Destination of Sub-Saharan African Refugees, 2017
2.11. Sub-Saharan Africa: Average Growth Rate by Country Type
2.12. Sub-Saharan Africa: Conflict Episodes: Growth Rates and Cumulative GDP per Capita Losses
2.13. Emerging Market and Developing Economies: Impact on Growth of Increase in Conflict Intensity
2.14. Sub-Saharan Africa: Effect on Growth of Different Conflict Intensity Levels
2.15. Impact on Growth of Increase in Conflict Intensity, Role of Institutions and Fiscal Fundamentals
2.16. Impulse Response of per Capita GDP in Response to Shock to Conflict Intensity
2.17. Sub-Saharan Africa: Impact of Conflict on Investment, Exports, and Productivity Growth
2.18. Sub-Saharan Africa: Impact of Conflict on Social Indicators
2.19. Sub-Saharan Africa: Index of Real GDP per Capita, Actual versus Forecast
2.20. Sub-Saharan Africa: Index of Real GDP per Capita, Actual versus Synthetic Control
2.21. Nigeria: Change in Conflict and Night-Light Growth, 2008–10 versus 2011–13
2.22. Sub-Saharan Africa: Conflict and Economic Activity at State Level Using Night-Light, Direct and Spillover Effects
2.23. Sub-Saharan Africa: Impact of Increase in Conflict on Real Growth of Fiscal Variables
2.24. Sub-Saharan Africa: Effect of Different Conflict Intensity Levels on Real Growth of Selected Fiscal Variables
2.25. Sub-Saharan Africa: Impact on Debt-to-GDP Ratio of Increase in Conflict Intensity
2.26. Sub-Saharan Africa: Cumulative Change in Debt-to-GDP Ratio during Conflict Episodes
Chapter 3
3.1. Africa: Trade Openness, 1990–2017
3.2. Intra-African and Trade Partners’ Trade Shares, 1990–2017
3.3. Intraregional Trade in Selected Regions, 2007–17
3.4. Trade Integration, 2015
3.5. Intra-African Trade versus Trade with the Rest of the World, 1990–2017
3.6. Regional Trade Integration and Export Sophistication, 2015
3.7. Grubel-Lloyd Intra-Industry Index across Regions, 2015
3.8. Africa: Average Tariff Rates by Regional Economic Community, 2010–17
3.9. Africa: Trade Integration in RECs
3.10. Role of Country Features in Regions’ Trade
3.11. Trade Gaps in African Subregional Economic Communities
3.12. Africa: Intraregional Trade Gap by Industry
3.13. Elasticity of Intraregional Trade to Tariffs by Industry
3.14. Nontariff Trade Costs, 2015
3.15. Elasticity of Intraregional Trade
3.16. Importance of Nontariff Bottlenecks
3.17. Africa: Potential Increase in Regional Trade
3.18. Infrastructure and Trade Logistics Gaps in Africa
3.19. Additional GDP Impact of Trade Expansion under Structural Reform Scenarios, Agricultural Exporter
3.20. Change in Gini Coefficients and Income Shares
3.21. Customs Revenue in African Countries, 2010–15
3.22. Estimated Static and Dynamic Revenue Losses from Tariff Reductions
Abbreviations
| AfCFTA | African Continental Free Trade Area |
| AfDB | African Development Bank |
| AMU | Arab Maghreb Union |
| ASEAN | Association of Southeast Asian Nations |
| CEMAC | Central African Economic and Monetary Community |
| CBR | correspondent banking relationship |
| CGE | computable general equilibrium |
| COMESA | Common Market for Eastern and Southern Africa |
| CPI | consumer price index |
| GDP | gross domestic product |
| ECOWAS | Economic Community of West African States |
| EPU | economic policy uncertainty |
| HIPC | Heavily Indebted Poor Country |
| ICRG | International Country Risk Guide |
| IDPs | internally displaced persons |
| IFRS 9 | International Financial Reporting Standard 9 |
| IMF | International Monetary Fund |
| LAIA | Latin American Integration Association |
| MDRI | Multilateral Debt Relief Initiative |
| MENA | Middle East and North Africa |
| NAFTA | North American Free Trade Agreement |
| NEER | nominal effective exchange rate |
| NPLs | nonperforming loans |
| PAFTA | Pan-Arab Free Trade Area |
| PRGT | Poverty Reduction and Growth Trust |
| RECs | Regional Economic Communities |
| REO | Regional Economic Outlook (IMF) |
| SACU | Southern African Customs Union |
| SADC | Southern African Development Community |
| SOEs | state-owned enterprises |
| SSA | Sub-Saharan Africa |
| UN | United Nations |
| UNCTAD | United Nations Conference on Trade and Development |
| US | United States |
| VAT | value-added tax |
| WAEMU | West African Economic and Monetary Union |
| WEO | World Economic Outlook (IMF) |
| WTO | World Trade Organization |
List of Country Abbreviations:
| DZA | Algeria |
| AGO | Angola |
| BEN | Benin |
| BWA | Botswana |
| BFA | Burkina Faso |
| BDI | Burundi |
| CPV | Cabo Verde |
| CMR | Cameroon |
| CAF | Central African Rep. |
| TCD | Chad |
| COM | Comoros |
| COD | Congo, Dem. Republic of |
| COG | Congo, Republic of |
| CIV | Côte d’Ivoire |
| DJI | Djibouti |
| EGY | Egypt |
| GNQ | Equatorial Guinea |
| ERI | Eritrea |
| SWZ | Eswatini |
| ETH | Ethiopia |
| FRA | France |
| GAB | Gabon |
| GMB | Gambia, The |
| DEU | Germany |
| GHA | Ghana |
| GIN | Guinea |
| GNB | Guinea-Bissau |
| ITA | Italy |
| KEN | Kenya |
| LSO | Lesotho |
| LBR | Liberia |
| LBY | Libya |
| MDG | Madagascar |
| MWI | Malawi |
| MLI | Mali |
| MRT | Mauritania |
| MUS | Mauritius |
| MAR | Morocco |
| MOZ | Mozambique |
| NAM | Namibia |
| NER | Niger |
| NGA | Nigeria |
| RWA | Rwanda |
| STP | São Tomé & Príncipe |
| SEN | Senegal |
| SLE | Sierra Leone |
| SOM | Somalia |
| ZAF | South Africa |
| SSD | South Sudan |
| SDN | Sudan |
| TZA | Tanzania |
| TGO | Togo |
| TUN | Tunisia |
| UGA | Uganda |
| ZMB | Zambia |
| ZWE | Zimbabwe |
Acknowledgments
The April 2019 issue of the Regional Economic Outlook: Sub-Saharan Africa (REO) was prepared by a team led by Papa N’Diaye under the direction of Anne-Marie Gulde-Wolf.
The team included Reda Cherif, Seung Mo Choi, Hilary Devine, Xiangming Fang, Jesus Gonzalez-Garcia, Cleary Haines, Salifou Issoufou, Lisa Kolovich, Siddharth Kothari, Russell Green, Andresa Lagerborg, Tomas McGregor, Cameron McLoughlin, Miguel Pereira Mendes, Nkunde Mwase, Monique Newiak, Rasmane Ouedraogo, Geremia Palomba, Adrian Peralta-Alva, Mahvash S. Qureshi, Amadou Sy, Brooke Tenison, Bruno Versailles, Jason Weiss, Torsten Wezel, Jiaxiong Yao, Mustafa Yenice, and Yunhui Zhao.
Charlotte Vazquez was responsible for document production, with assistance from Krisztina Fabo. The editing and production were overseen by Linda Long of the Communications Department.
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).
Executive Summary
Two-Track Recovery AMID Elevated Uncertainty
The economic recovery in sub-Saharan Africa continues, but there is duality in growth performance and prospects within the region. Aggregate growth is set to pick up from 3 percent in 2018 to 3.5 percent in 2019 and stabilize at slightly below 4 percent over the medium term—or about 5 percent, excluding the two major economies, Nigeria and South Africa. These aggregate numbers mask considerable duality in growth prospects within the region. About half of the region’s countries, mostly non-resource-intensive, are expected to grow at 5 percent or more, and see a faster rise in income per capita than the rest of the world on average over the medium term. However, the remaining countries, comprising mostly resource-intensive countries are expected to fall behind. And as these countries—including Nigeria and South Africa—are home to more than two-thirds of the region’s total population, it is important for the policy uncertainties that are holding back growth to be addressed for the lion’s share of sub-Saharan Africans to enjoy improved standards of living.
External and domestic headwinds are weighing on growth prospects.
The global expansion is losing momentum, including in key trading partners such as China and the euro area; trade tensions remain elevated; global financial conditions are volatile and have tightened somewhat relative to October 2018; and commodity prices are expected to remain low. On the domestic front, climate shocks are likely to impact agricultural output in southern Africa, while policy uncertainty is weighing on growth prospects in several countries.
Debt vulnerabilities remain elevated in some countries. Weaknesses in public balance sheets are also weighing on countries’ external positions, with reserve buffers below levels typically considered adequate in more than half of the countries in the region.
At the same time, high nonperforming loans continue to put a strain on financial systems, while weaknesses in public financial management systems are manifesting themselves in large domestic arrears with potential effects on growth and domestic financial systems.
The familiar challenge of finding ways to address human and physical capital investment needs is being complicated by declining fiscal space and a less supportive external environment. Central to resolving this challenge is building fiscal space, enhancing resilience to shocks, and fostering an environment conducive to sustained, high and inclusive growth. Meeting this challenge would be even more difficult if the downside risks to growth materialize (for example, if global growth is even weaker than envisioned in the current baseline). This underscores the need to accelerate reforms and calibrate the size and pace of policy adjustments to ensure that any shift in policies is consistent with credible medium-term macroeconomic objectives, available financing, and debt sustainability.
While the dualism between resource-intensive and non-resource-intensive countries is manifest in their economic prospects, policy priorities, and the severity of their budgetary constraints, these countries also share the challenges of strengthening resilience and creating sustained high and inclusive growth. Addressing these challenges would require:
Stepping up revenue mobilization, ensuring efficient public investment, strengthening public financial management, containing fiscal risks from state-owned enterprises, improving debt management and resolution frameworks, and enhancing debt transparency. Enhancing exchange rate flexibility, in countries that are outside monetary unions, and strengthened monetary policy and financial systems are also key.
Raising both productivity and private investment, while ensuring a more equitable sharing of the benefits of increased prosperity. Achieving this will require policies to enhance the contestability of markets and create an environment that fosters a dynamic private sector, such as addressing salient constraints to business operations and deeper trade integration (notably through the African Continental Free Trade Area, AfCFTA), and by improving access to and the provision of financial services and basic services (including health and education).
The Economic Consequences of Conflict
The second chapter explores the challenges faced by conflict-affected countries in sub-Saharan Africa, providing a comprehensive analysis of the trends and economic consequences of conflicts. Although the intensity of conflicts in recent years is lower than that observed in the 1990s, the region remains prone to conflicts, with around 30 percent of the countries affected in 2017. Moreover, the nature of conflicts has changed, with traditional civil wars being replaced by non-state-based conflicts, including the targeting of civilians through terrorist attacks.
Conflicts in the region are associated with a large and persistent decline in per capita GDP and have significant spillover effects on nearby regions and countries. They also pose significant strains on countries’ public finances, lowering revenue, raising military spending, and shifting resources away from development and social spending, which further aggravates the conflicts’ economic and social costs.
The findings highlight the significant costs and formidable challenges faced by countries suffering from conflict and underscores the need to prevent conflicts, including by promoting inclusive economic development, building institutional capacity, and social cohesion. For countries in conflict, efforts should focus on limiting the loss of human and physical capital by protecting social and development spending. While this may be especially daunting given fiscal pressures, well-targeted and coordinated humanitarian aid and concessional financial assistance can provide some relief.
Is The African Continental Free Trade Area a Game Changer for the Continent?
The third chapter takes stock of intraregional trade in Africa and examines the potential benefits and challenges of implementing the AfCFTA. The AfCFTA agreement envisions elimination of tariffs on most goods, liberalization of trade of key services, addressing nontariff obstacles that hamper intraregional trade, and eventually creating a continental single market with free movement of labor and capital.
The AfCFTA will likely have important macroeconomic and distributional effects. It can significantly boost intra-African trade, particularly if countries tackle nontariff bottlenecks to trade, including physical infrastructure, logistical costs, and other trade facilitation hurdles. The picture is not uniform. More diversifed economies and those with better logistics and infrastructure will benefit relatively more from trade integration. Fiscal revenue losses from tariff reductions are likely to be limited on average, with a few exceptions. Moreover, deeper trade integration is associated with a temporary increase in income inequality.
The findings suggest that, in addition to tariff reductions, policy efforts to boost regional trade should focus on reforms to address country-specific nontariff bottlenecks. To ensure that the benefits of regional trade integration are shared by all, policymakers should be mindful of the adjustment costs that integration may entail. For less developed and agriculture-based economies, trade policies should be combined with structural reforms to improve agricultural productivity and competitiveness. Furthermore, governments should facilitate the reallocation of labor and capital across sectors (for example, active-labor market programs such as training and job-search assistance, and measures that enhance competitiveness and productivity) and bolster safety nets (income support and social insurance programs) to alleviate the temporary adverse effects on the most vulnerable.