Front Matter

Front Matter

International Monetary Fund
Published Date:
April 2014
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    ©2014 International Monetary Fund

    Cataloging-in-Publication Data

    Regional economic outlook. Sub-Saharan Africa. — Washington, D.C.: International

    Monetary Fund, 2003–

    v.; cm. — (World economic and financial surveys, 0258-7440)

    Twice a year.

    Began in 2003.

    Some issues have thematic titles.

    1. Economic forecasting — Africa, Sub-Saharan — Periodicals. 2. Africa, Sub-Saharan — Economic conditions — 1960–— Periodicals. 3. Economic development — Africa, Sub-Saharan — Periodicals. I. Title: Sub-Saharan Africa. II. International Monetary Fund. III. Series: World economic and financial surveys.

    HC800.A1 R445

    ISBN-13: 978-1-48434-288-6 (paper)

    ISBN-13: 978-1-48434-913-7 (Web PDF)

    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 Telefax: (202) 623-7201





    Bank of Tanzania


    Bank of Uganda


    Bank of Zambia


    Brazil, Russia, India, China


    Central Bank of Kenya


    Economic and Monetary Community of Central Africa


    common external tariff


    Currency zone of CEMAC and WAEMU


    consumer price index


    East African Community


    Kenya, Rwanda, Tanzania, and Uganda


    East African Central Bank


    East African Monetary Institute


    East African Monetary Union


    Emerging Portfolio Fund Research


    foreign direct investment


    gross domestic product


    Human Development Index


    Heavily Indebted Poor Countries


    inflation consultation clause


    Information System for Instruments of Monetary Policy


    inflation targeting


    low-income countries


    Millennium Development Goals


    monetary policy frameworks


    monetary policy committees


    monetary policy consultation clause


    ordinary least squares


    Regional Economic Outlook


    sub-Saharan Africa


    small and medium enterprises


    total factor productivity


    terms of trade


    West African Economic and Monetary Union


    World Economic Outlook


    This April 2014 issue of the Regional Economic Outlook: Sub-Saharan Africa (REO) was prepared by a team led by Alfredo Cuevas and Michael Atingi-Ego under the direction of Abebe Aemro Selassie.

    The team included Isabell Adenauer, Adrian Alter, Jorge Iván Canales Kriljenko, Domenico G. Fanizza, Rodrigo Garcia-Verdu, Jesus Gonzalez-Garcia, Cleary Haines, Mumtaz Hussain, Emmanouil Kitsios, Montfort Mlachila, R. Armando Morales, Marco Pani, Bozena Radzewicz-Bak, George Rooney, Alun Thomas, Juan Treviño, S. Kal Wajid, and Oral H. Williams.

    Specific contributions were made by Dalmacio Benicio, Andrew Berg, Luisa Charry, Samba Mbaye, Clara Mira, Yibin Mu, and Rafael Portillo; and editorial assistance was provided by Jenny Kletzin DiBiase. Natasha Minges was responsible for document production, with assistance from Anne O’Donoghue and typesetting assistance from Charlotte Vazquez. The editing and production were overseen by Joanne Johnson of the Communications Department with assistance from Martha Bonilla.

    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

    Sustaining Growth Amid Shifting Global Forces

    Economic growth in sub-Saharan Africa is projected to pick up from 4.9 percent in 2013 to about 5½ percent this year. This acceleration reflects improved prospects in a large number of countries in the region, including most oil exporters and several low-income countries and fragile states. Economic activity in the region continues to be underpinned by large investments in infrastructure and mining and maturing investments. Inflation looks set to remain contained in most countries, while fiscal balances, on current policies and prospects, are generally projected to improve in 2014. Current account deficits look to remain elevated, including due to the ongoing high level of infrastructure investment and foreign direct investment related imports.

    This solid near-term outlook is nonetheless subject to downside risks. External factors pose by far the more potent threats to the region as a whole, but domestic risks are more significant in some countries.

    • Growth in emerging markets could prove less supportive. The high growth that many countries in sub-Saharan Africa have enjoyed in recent years has been supported by strong growth in the largest emerging market economies. Should growth in these countries—and particularly in China—slow much more than currently envisaged, the implications for the region could be significant. Many countries in the region would be certain to face lower export demand. The outlook for some commodity prices—particularly, copper and iron ore—would likely also be grim, with adverse implications for further mining investment for these commodities. Beyond all this, tighter financial conditions in China could also reduce the appetite of Chinese companies for investing abroad.

    • Tighter global financial conditions. The highly accommodative monetary policies of advanced economies in the wake of the global financial crisis have prompted high inflows of capital into the region’s emerging and frontier markets in recent years. As these policies are rolled back, the region faces less favorable financing conditions and a slowdown, or even reversal, of private capital flows.

    • Rising fiscal imbalances in some countries. In 2009–10, many countries in sub-Saharan Africa used available fiscal space to counter the impact of the global financial crisis on their economies. But four years after the crisis, fiscal policy in the region has remained on an expansionary footing despite growth having reverted to precrisis levels in most cases. Particularly vulnerable are those countries that have relied heavily on portfolio inflows to finance their high fiscal and/or current account deficits.

    • Security conditions remain difficult in some areas. The ongoing conflicts in the Central African Republic and South Sudan are exacting a heavy toll in those countries and threatening spillover effects on some neighboring countries. Other countries in the Sahel belt also face terror threats, with adverse implications for stability and pursuit of development objectives.

    Against this backdrop, greater emphasis is called for in the coming months on sustaining the macroeconomic stability that has underpinned the high growth the region has enjoyed in recent years. Particularly in countries with heightened reliance on portfolio flows to finance elevated fiscal and external current account deficits, there is need for policies focused on preserving stability, if progress toward long-term development objectives is not to be derailed. Countries should be ready to adjust their fiscal plans in the event of a fall in external financing while allowing the exchange rate to adjust as appropriate. Even where external financing is more secure, fiscal policy needs to emphasize rebuilding buffers, provided growth is at potential—the situation in many countries. This period of robust growth should be used to ensure that tax revenue collection keeps pace with or exceeds spending growth.

    Fostering Durable and Inclusive Growth

    The second chapter in this report considers how growth in the region can be made more inclusive. Supported by sound economic policies, debt relief, stronger institutions, and high investment, many countries in sub-Saharan Africa have now sustained 5–6 percent growth rates for more than a decade, in the process bringing down poverty and improving living conditions. Nevertheless, limited structural transformation has prevented further reductions in poverty. For instance, although Mozambique has grown at the same pace as Vietnam, poverty has declined much faster in Vietnam as a result of its faster structural transformation, which moved more workers into better-paying jobs in industry and services.

    This chapter identifies areas where more emphasis should be placed to help make growth more inclusive in the near term. Alongside ongoing initiatives to promote structural transformation in many countries—such as investment in physical and human capital—there is scope to make growth in the near term more inclusive by facilitating job creation, promoting financial inclusion, and raising productivity in agriculture, where most of the population is employed. These objectives can be pursued by improving the business climate, providing better technical training, reducing financial transaction costs, and exploiting new technologies such as mobile banking.

    Improving Monetary Policy Frameworks

    The final chapter discusses the recent evolution in the conduct of monetary policy in a select group of countries in sub-Saharan Africa, underscoring that a vigilant and effective monetary policy is needed to mitigate the risks to macroeconomic and financial stability. With inflation declining to single digits, central banks in many sub-Saharan African countries face a new set of challenges. The relationship between money and inflation has become weaker as countries have opened their capital accounts—thereby attracting higher capital inflows—and deepened their financial markets. As advanced economies tighten their monetary policies, frontier market economies will also face higher funding costs and a heightened risk of reversal of capital flows.

    Enhancing the effectiveness of monetary policy will require a number of reforms, including instruments to manage excess liquidity, high-frequency data to guide timely intervention, sound analytical models to forecast inflation, and a clear communications strategy to anchor expectations. The focus of monetary policy will also shift from quantitative monetary targets to a deeper assessment of monetary conditions. A number of sub-Saharan African countries have already taken steps in this direction.

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