The Web edition of the IMF Survey is updated several times a week, and contains a wealth of articles about topical policy and economic issues in the news. Access the latest IMF research, read interviews, and listen to podcasts given by top IMF economists on important issues in the global economy.


The Web edition of the IMF Survey is updated several times a week, and contains a wealth of articles about topical policy and economic issues in the news. Access the latest IMF research, read interviews, and listen to podcasts given by top IMF economists on important issues in the global economy.

African Regional Economic Outlook

Growth in sub-Saharan Africa remains strong and prospects for next year are very good, but this growth is still insufficient to meet the Millennium Development Goals (MDGs), remarked Abdoulaye Bio-Tchane, IMF African Department Director, at a September 23 press briefing on the region’s recent economic developments and prospects. Real GDP growth for the region is expected to slow to 4.6 percent in 2005 from 5.3 percent in 2004, largely because of a deceleration of growth in oil-producing countries and a further worsening of oil importers’ terms of trade.

Despite the impact of higher oil prices, real GDP growth in non-oil-producing economies is expected to remain unchanged at 4.5 percent on average in 2005, and to exceed 5 percent in more than one-third of these economies. According to the latest Regional Economic Outlook: Sub-Saharan Africa Supplement, continued sound policies have helped many of these economies achieve sustained, robust growth. In some oil-importing countries, higher world prices for cocoa, coffee, tea, and some metals have offset, to some extent, the negative impact on the terms of trade of rising oil prices and declining prices for food and other agricultural exports. However, the U.S. dollar’s appreciation vis-à-vis the euro during 2005 has had an additional negative effect on the terms of trade of the CFA franc zone countries in West and Central Africa, which peg their currency to the euro.

CFA franc zone countries are among the 24 countries in sub-Saharan Africa that account for 6 percent of world textile and cotton output. Developments in textile and cotton markets have further worsened the terms of trade for these 24 countries and dampened their growth prospects. Although cotton prices recovered somewhat in the first half of this year, prices remain well below the average of recent years, largely because of over-supply caused partly by continued subsidization of the sector in high- and middle-income countries. Moreover, African textile exporters have not fared well from the ending of the Multifiber Arrangement in January 2005, losing out to competition from China and other Asian countries, especially in the U.S. market. Sub-Saharan African textile and clothing exports to the United States fell by around 5 percent in the first four months of 2005, compared with the same period last year. In contrast, exports from China, Hong Kong SAR, and Macao SAR to the United States rose by more than 36 percent.

Strong performance projected for sub-Saharan Africa

Oil producers are forecast to grow at significantly higher rates in 2006.

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Note: The oil-producing economies are Angola, Cameroon, Chad, Congo (Republic of), côte d’Ivoire, Equatorial Guinea, Gabon, Nigeria, and São Tomé and Príncipe. The non-oil-producing economies are Benin, Botswana, Burkina Faso, Burundi, Cape Verde, Central African Republic, Comoros, Congo (Democratic Republic of), Ethiopia, The Gambia, Ghana, Guinea-Bissau, Kenya, Lesotho, Madagascar, Malawi, Mali, Mauritius, Mozambique, Namibia, Niger, Rwanda, Senegal, Seychelles, Sierra Leone, South Africa, Swaziland, Tanzania, Togo, Uganda, Zambia, and Zimbabwe.Data: IMF, Regional Economic Outlook: Sub-Saharan Africa Supplement, September 2005.

Further increases in oil prices and poor harvests in some countries have put upward pressure on inflation, especially in oil-importing countries. Average inflation in the region is forecast to rise half a percentage point, to 9.9 percent, in 2005, but to fall back to 8.3 percent in 2006, on the basis of continuing prudent monetary policies and subdued world inflation.

Food shortages plague many countries

In the past year, poor harvests in the Sahel region and several countries in eastern and southern Africa have depressed economic performance. Food production shortfalls are expected this year in Burundi, Chad, Malawi, Mozambique, Niger, and Swaziland, and the Food and Agriculture Organization has identified as many as 20 sub-Saharan African countries in need of food assistance. Recurring food shortages reflect the cumulative effects of adverse shocks on fragile environments—made worse, in some cases, by conflict, political turmoil, and the effects of HIV/AIDS on the agricultural labor force.

Many sub-Saharan African countries are finding it increasingly challenging to implement appropriate policies to adjust to external shocks, the report points out. Notably, oil importers’ external and domestic balances have been deteriorating. The report urges oil importers to contain emerging fiscal pressures by cutting nonpriority spending, strengthening the revenue base, and, where possible, allowing exchange rate flexibility. Strong policy frameworks should accompany increases in aid or debt relief so that these flows can be more effectively absorbed. Factors that would help mitigate pressures for real exchange rate appreciation include high import content in additional public spending, focusing higher spending on infrastructure improvements to boost productivity and ease supply bottlenecks, and further trade liberalization. For the region’s oil producers, accumulating foreign exchange reserves—generally accompanied by a buildup of net government assets with the central bank—can be an appropriate way to ease pressures for real appreciation caused by strong oil revenues.

For oil-producing countries, the average current account surplus, including grants, is projected to increase from 2.3 percent of GDP in 2004 to 7.7 percent this year. Higher revenues have enabled these countries to strengthen their fiscal positions, with the group’s overall fiscal surplus projected to rise to 7.9 percent of GDP, from 4.3 percent last year. The report urged oil-producing countries to continue to smooth the fiscal spending response to higher oil prices, take a long-term perspective in implementing fiscal policy, and, especially in view of the scope for “rent seeking” associated with oil windfalls, improve fiscal transparency. At the same time, decisions concerning the extent to which fiscal spending is increased over time need to take into account individual country circumstances.

Political and economic risks cloud prospects

Although the region’s economic growth in 2006 is expected to rebound to 5.3 percent, largely on the strength of economic activity in oil-producing countries, the report underscores that the region’s prospects remain subject to a number of political and economic risks. If the recent international focus on further reducing debt and stepping up aid bears fruit, economic growth and poverty reduction would advance—assuming recipient countries implement policies that ensure the effective absorption and use of new aid flows.

On the downside, the European Union (EU) proposed sugar reforms—which would dramatically cut the internal EU sugar price and eliminate special quotas beginning in 2006—could lead to severe export revenue losses for several sugar-producing countries such as Mauritius and Swaziland. Other downside risks include the continued vulnerability of much of the region to drought and other natural disasters, the impact of HIV/AIDS, and the still-fragile security situation in the Great Lakes region. Uncertainties in world oil and other commodity markets also pose risks for the region.

The full text of the African Regional Economic Outlook: Sub-Saharan Africa Supplement is available on the IMF website (

IMF Survey, Volume 34, Issue 18
Author: International Monetary Fund. External Relations Dept.