- International Monetary Fund. African Dept.
- Published Date:
- October 2012
© 2012 International Monetary Fund
Regional economic outlook. Sub-Saharan Africa.—Washington, D.C.: International Monetary Fund, 2003–
v. ; cm.—(World economic and financial surveys, 0258-7440)
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This October 2012 issue of the Regional Economic Outlook: Sub-Saharan Africa (REO) was prepared by a team led by Alfredo Cuevas and Montfort Mlachila, under the direction of Séan Nolan.
The team included Jorge Iván Canales-Kriljenko, Emily Forrest, Rodrigo Garcia-Verdu, Cheikh Gueye, Promise Kamanga, Seok Gil Park, Gonzalo Salinas, Jon Shields, Alun Thomas, Juan Treviño, and John Wakeman-Linn. Specific contributions were made by Trevor Alleyne, Antonio David, Floris Fleermuys, Nikoloz Gigineishvili, Ragnar Gudmundsson, Farayi Gwenhamo, Mumtaz Hussain, Christian Josz, Estelle Liu, Carla Macario, Calvin McDonald, Jean-Claude Nachega, Sweta Saxena, Yingying Shi, Sukhwinder Singh, Saji Thomas, Jean van Houtte, Oral Williams, and Kevin Wiseman; and with editorial assistance from Jenny Kletzin DiBiase. Natasha Minges was responsible for document production, with assistance from Anne O’Donoghue, and publishing assistance from Charlotte Vazquez. The editing and production was overseen by Joe Procopio of the External Relations 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).
Chapter 1: Maintaining Growth in an Uncertain World
Economic conditions in sub-Saharan Africa have remained generally robust against the backdrop of a sluggish global economy. Most low-income countries continue to grow, although drought in many Sahel countries and political instability in Mali and Guinea-Bissau have undermined economic activity. The situation is less favorable for many of the middle-income countries, especially South Africa, that are more closely linked to European markets. Inflation has been slowing, as pressures on food and fuel prices eased following a surge during 2011. The easing of inflation has been particularly noticeable in eastern Africa, helped by monetary tightening.
The near-term outlook for sub-Saharan Africa remains broadly positive, and growth is projected at 5¼ percent a year in 2012–13. Strong domestic demand, including from investment, is expected to support growth in many low-income countries, while a weak external environment will be a drag on growth in middle-income countries with significant trade links to Europe. With global commodity prices projected to remain soft and domestic climatic conditions improving, inflation is expected to decline to around 8 percent in 2012, and about 7 percent in 2013. The recent surge in international cereal prices is likely to exacerbate food insecurity in some places, and could be a threat to inflation if it intensifies.
Downside risks have intensified, mostly stemming from the uncertain global economic environment. Deteriorating conditions in the world economy could quickly spill over into sub-Saharan Africa, potentially reducing the regional growth rate by about 1 percent a year, with the actual impact dependent on both the severity and the duration of the global downturn. The impact would be most severe in countries where exports are undiversified and policy buffers low.
Policy settings should reflect specific country conditions. Policymakers should rebuild fiscal and external buffers where these remain low and where growth is as robust as envisaged under the baseline. If the global economy experiences a significant downturn, with knock-on effects on the region, then avoiding pro-cyclical fiscal contraction would be an imperative so long as the wider deficits can be financed. Many countries will be able to manage a downturn, via a mix of fiscal, monetary, and exchange rate measures—with the appropriate mix dependent on exchange rate arrangements, the ability to finance wider deficits, and the inflation situation.
Chapter 2: Nigeria and South Africa: Spillovers to the Rest of Sub-Saharan Africa
South Africa’s linkages with the rest of sub-Saharan Africa are steadily intensifying, but are significant mainly within southern Africa. Countries in the Southern African Customs Union (SACU) and the Southern African Development Community, receive some spillovers through export demand effects, direct investment, and, in some cases, migration flows, although these spillovers are typically modest. Developments in South Africa appear to have minimal impact on the rest of sub-Saharan Africa.
Nigeria is an important export market only for a few neighboring countries, but financial linkages with countries further afield are growing with the regional expansion of Nigerian banks. Porous borders produce complex trade flows at the sub-regional level that are heavily influenced by tax/subsidy policies in Nigeria. Inflation in neighboring countries is sensitive to inflation developments in Nigeria.
Chapter 3: Structural Transformation in Sub-Saharan Africa
Some degree of structural transformation—understood as the shift of workers from low to high average productivity activities and sectors—has been observed in most sub-Saharan African countries since 1995. There is significant heterogeneity within sub-Saharan Africa. Most oil exporters have seen sustained increases in average labor productivity through spillovers into the non-oil sector. In most middle-income countries, the pattern of structural transformation observed has included positive average labor productivity growth in the agricultural sector, as well as a declining share of agriculture in total GDP. In most non-fragile low-income countries agricultural productivity growth has been positive, although it is still low compared to middle-income countries and to other regions. In contrast, significant structural transformation is nearly absent in most fragile countries, which have generally experienced low and irregular growth.
The path to structural transformation seems to vary across sub-Saharan African countries. Depending on resource endowments, labor skills, and other factors, some sub-Saharan African countries may follow the Asian structural transformation path through low-wage manufacturing. Others, instead, may transform through services, while still others through the transformation of their agricultural sector. Irrespective of the path followed, structural transformation in sub-Saharan Africa could be accelerated through higher agricultural productivity growth, which requires investing more in the sector, and by narrowing the skills gap, improving the investment climate, and removing infrastructure bottlenecks.