IMF notice progress on economic growth in Sub-Saharan Africa

But warn on negative aspect of risk to global economy

The International Monetary Fund (IMF) on Wednesday released the “October 2011 Regional Economic Outlook: Sub-Saharan Africa” with the growth rate expected to increase in 2012 to nearly six percent, because of one-off boosts to production in a number of countries.

However, it said caution should be taken regarding the negative aspect of danger to the global economy.

“Growth has remained strong in the region in recent years, and most low-income countries in Africa weathered the global economic slowdown well. 

The Regional Economic Outlook projects that growth in sub-Saharan African (SSA) economies will remain on average above 5 percent in 2011,” Ms. Antoinette Monsio Sayeh, Director of the IMF’s African Department said. “The growth rate is expected to increase in 2012 to nearly 6 percent, because of one-off boosts to production in a number of countries. Beneath these good overall trends for SSA, however, there is considerable diversity.”

In December 2010, the African Development Bank (ADB) during its annual general meeting in the Ivory Coast capital, Abidjan, projected that the continent’s economy is set to rebound from the global financial crisis, with 80 percent of African economies expected to grow. The ADB estimated that “growth could top five percent by 2011, putting African economies back on a 10 year track that was disrupted by the 2009 global economic crisis. But the recovery will be uneven.”

IMF’s Ms. Antoinette Monsio Sayeh noted on October 19, 2011 that most low income countries (LICs) have been doing very well. One third of LICs are expected to grow by more than six percent this year. But poor households have been hit hard by rising food and fuel prices, and famine is devastating the Horn of Africa.

She added: “Some middle income countries were severely affected by the global crisis. In South Africa, with unemployment stubbornly high, growth will be limited to at most 3½ percent this year.”

“Oil exporters have enjoyed the fruits of elevated oil prices, and the non-oil sectors in their economies are projected to grow by 7½ percent this year,” said Ms. Sayeh, who warns that there are significant downside risks to this outlook. “Global financial volatility and a sharp slowdown in growth in advanced countries would affect SSA by subduing export demand and private financing flows, restricting growth particularly in the region’s more integrated economies.”

The “October 2011 Regional Economic Outlook: Sub-Saharan Africa” highlighted that volatility in commodity markets could cause further disruptions in macroeconomic balances, with both winners and losers within the region.

However, the report cautions that “there are also risks from within the region” since inflation rates have begun to rise again, driven in the first instance by rising food and fuel prices. “Consumer prices rose on average by 10 percent in the year to June 2011, up from 7½ percent a year earlier. And some countries have seen much sharper increases in inflation, extending beyond the immediate impact of higher food and fuel prices,” Ms. Sayeh said. “Policies need to tread a fine line between addressing the challenges posed by strong growth and preparing to ward off the potentially adverse effects of another global downturn. At the same time, Sub-Saharan Africa needs to continue to invest in growth and employment, which are critical for sustained poverty reduction.”

‘How Inclusive has Africa’s Recent High Growth Episode Been?’

While introducing the Regional Economic Outlook chapter, Ms. Sayeh said: “New evidence from household surveys shows that the average living standards of relatively poor households in some fast-growing economies rose strongly in the early 2000s. Comparing across countries, the poorest 25 percent of households fared best in countries where economic growth was higher.”

“This evidence sheds some light on an apparent enigma in aggregate data showing, at best, a very weak relationship between poverty and growth. It suggests that one important link in the chain between economic growth and poverty reduction is growth in agricultural employment,” she said. 

Cross-country differences in agricultural employment growth explain a large part of observed differences in the relative consumption growth of the poorest households among the countries sampled. The chapter also shows that real income growth may have been significantly underestimated in some countries, mainly because of biases in the way that consumer price inflation has been measured,” Ms. Sayeh noted.

‘Sub-Saharan Africa’s engagement with emerging partners’

Talking on Regional Economic Outlook chapter ‘Sub-Saharan Africa’s engagement with emerging partners’ Ms. Sayeh observe that “A fast-paced reorientation in SSA toward new markets is under way, with nontraditional partners now accounting for about 50 percent of the region’s exports and almost 60 percent of its imports.

While the region’s exports are still heavily concentrated in oil, gas, and minerals, particularly in the case of its largest emerging partners: China, India, and Brazil, many emerging markets purchase a wider range of products. Foreign Direct Investment (FDI) into the region is also diversified, including infrastructure, agriculture, and telecommunications.

“This reorientation brings the usual benefits of greater international trade, but should also boost long-term growth by reducing volatility in exports and output. The emergence of new partners provides the region with both significant opportunities, lower cost of inputs and consumption goods, transfer of technology, and economies of scale, and challenges, managing high concentration of exports on commodities and rapid sectoral changes,” Ms. Sayeh said.

Click on this link for full report: http://www.imf.org/external/pubs/ft/reo/2011/afr/eng/sreo1011.pdf

Author: Modou S. Joof for The Voice Newspaper