- International Monetary Fund. African Dept.
- Published Date:
- April 2010
© 2010 International Monetary Fund
Regional economic outlook: Sub-Saharan Africa: Back to High Growth? – Washington, D.C.: International Monetary Fund, 2010.
p. ; cm. – (World economic and financial surveys, 0258-7440)
Includes bibliographical references.
1. Economic forecasting – Africa, Sub-Saharan. 2. Global Financial Crisis, 2008-2009.
3. Economic development – Africa, Sub-Saharan. 4. Fiscal policy – Africa, Sub-Saharan.
I. International Monetary Fund. II. Series: World economic and financial surveys.
HC800 .R445 2010
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Central African Economic and Monetary Union
Currency zone of CEMAC and WAEMU
Consumer price index
Development Assistance Committee
Exchange market pressure
Foreign direct investment
Gulf Cooperation Council
Gross domestic product
Heavily indebted poor countries
International Country risk Guide
Millennium Development Goal
Multilateral Debt Relief Initiative
Medium term fiscal frameworks
National Commission for Social Action
Official development assistance
Overseas Development Institute
Organisation for Economic Co-operation and Development
Public Financial Management
Regional Economic Outlook
Special Drawing Rights
West African Economic and Monetary Union
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 April 2010 issue of the Regional Economic Outlook: Sub-Saharan Africa (REO) was prepared by a team led by Abebe Aemro Selassie, Robert Burgess, and Montfort Mlachila under the direction of Saul Lizondo. The team included Duval Guimarães, Robert Keyfitz, Victor Lledó, Yanliang Miao, Gustavo Ramirez, Jon Shields, and Irene Yackovlev. Specific contributions were made by Jiro Honda, Alexei Kireyev, Amina Lahreche, Marcos Poplawski-Ribeiro, Genevieve Verdier, and Charles Amo Yartey; with editorial assistance from Anne Grant. Production was by Natasha Minges assisted by Anne O’Donoghue, and the editing and production was overseen by Joanne Blake of the External Relations Department assisted by Martha Bonilla.
The economic slowdown in sub-Saharan Africa looks set to be mercifu ly brief:
Output is projected to expand by 4¾ percent in 2010, compared to 2 percent in 2009. Most countries in the region are now bouncing back from the growth slowdown or contraction in output experienced during the global recession. The brevity of the slowdown owes much to the relative strength of the region’s economies heading into 2008–09, the expansionary macroeconomic stance then adopted by most countries, and the relatively quick recovery in global economic activity.
Althoug h most low-income countries experienced only a smal decline in growth, the slowdown has imposed some lasting costs on the region. Progress in poverty reduction has been held up. Some of the region’s oil exporters and middle-income countries have faced large adjustments, including sharply rising unemployment.
The prospects for 2011 and beyond look good. Output growth is projected to accelerate to 5¾ percent in 2011, playing off the expected continued improvement in global economic conditions. Over the medium term, growth rates in most sub-Saharan African countries are expected to be only marginally below those enjoyed in the mid-2000s.
The main risks to the outlook are a possible hiatus in the global recovery (causing demand and commodity prices to slip) and, internally, political instability or a deterioration in financial systems in some countries.
Perhaps one of the least noticed aspects of the global downturn has been the resilience of the sub-Saharan Africa region. The limited integration of many countries in the region into the global economy may have helped, but only marginally. Previous (milder) global economic slowdowns had a much more damaging impact. This time, the global downturn was much sharper, but the dislocation was far less. The main factor distinguishing this slowdown from previous cycles has been the stronger macroeconomic position of most countries in the region.
As the g lobal financial crisis started to unfold, economic policies were directed quickly and e fectively toward ameliorating the impact of the external shocks. Most governments that anticipated the slowdown made plans to accelerate public spending growth, despite stagnant or declining ratios of revenue to GDP. The rise in their fiscal deficits helped to offset faltering private spending. On the monetary policy side, policy interest rates were also reduced except where this would have been counterproductive because of exchange rate considerations or inflationary pressures.
Moreover, most countries were able to shield pro-poor and pro-g rowth public spending. According to preliminary budget outturn numbers, health, and education spending increased in real terms in 20 of the 29 low-income countries in the region in 2009. In a similar vein, government capital spending also looks to have held up in 2009, increasing in real terms in more than half of the countries in the region.
External financing proved to be much less of a constraint than feared. The boom-bust cycle in private financial inflows was less marked than in other regions, largely due to the high share in sub-Saharan Africa of foreign direct investment over other more volatile forms of private capital. Remittances also fell only slightly and official financing flows have increased in response to efforts by the IMF and other agencies to scale up support in response to the crisis. Foreign investors are already beginning to return to the region’s more advanced economies, where macroeconomic policies will need to take into account these renewed flows to avoid overheating, unwarranted exchange rate appreciation, and asset price booms.
More than a third of countries in the region, however, remain on the margins of international capital markets and dependent on o ficial forms of external financing. For these countries, the same reforms that are needed to raise productive potential—including promoting trade and financial sector development, encouraging domestic saving and investment, raising standards of governance, and strengthening institutions—are also likely to help attract private inflows on a sustained basis.
Looking ahead, for most countries in the region, the emphasis of economic policies now needs to be on medium-term development objectives consistent with macroeconomic stability considera tions. With recovery under way, fiscal policies in these countries needs to shift from near-term and output stabilization considerations toward a more traditional focus on strengthening health and education systems and addressing infrastructure gaps. Where fiscal deficits have been increased beyond sustainable medium-term paths, these should be revisited so that policy buffers can be restored. Of course, in some countries where output remains well below potential, there remains a strong case for fiscal policy to help sustain demand in the near term, subject to financing availability.