IMF projects robust 5% 2013 GDP growth for Sub-Saharan Africa
While Sub-Saharan Africa continues its strong growth momentum with the International Monetary Fund (IMF) projecting a robust GDP rate at about 5 percent in 2013, the October outlook represents a downward revision of –0.7 percent of GDP on average compared to the May 2013 report. (Image: Reuters)
Sub-Saharan Africa continues its strong growth momentum with the International Monetary Fund (IMF) projecting a robust GDP rate at about 5 percent in 2013 and 6 percent in 2014. IMF gives the region a thumbs up as economic growth continues to be backed by increasing investment in infrastructure and productive capacity.
However, the outlook is not as strong as was portrayed in the May 2013 edition of IMF’s Regional Economic Outlook for Sub-Saharan Africa, and represents a downward revision (–0.7 percent of GDP on average in 2013 and –0.1 percent in 2014). The region’s economies are characterized by rising financing costs, less dynamic emerging market economies, and less favorable commodity prices, the report notes.
The report adds that the recent widening of the current account deficit in many countries in sub-Saharan Africa reflects, in most cases, increased investment in export-oriented activities and infrastructure. To a significant extent the increased deficits are being financed by foreign direct investment (FDI), but there are some economies in which the deficits have been accompanied by lower saving or higher external borrowing, causing concern.
For instance, several countries experienced large current account deficits since 2007 even after netting out FDI-related flows. These include Mauritius, Burundi, Cape Verde, The Gambia, Guinea, Liberia, Rwanda, Togo, and Zimbabwe, among others. These deficits were largely financed through net external borrowing, although in some countries (including Guinea, Liberia, and Togo) the stock of debt actually declined as a result of debt relief.
Also, fiscal deficits have remained elevated in a large set of countries since the global crisis. Although in most countries government debt remains manageable, a few cases now need fiscal consolidation to ensure sustainability of the public finances in the medium term or to rebuild buffers. In many low-income countries, revenue mobilization remains a priority to provide resources for social and capital spending.
Besides spiraling current account and fiscal deficits, lack of inclusive growth is another issue plaguing emerging economies. In Botswana, Namibia, and Mauritius, three established middle-income countries, growth has recently become less inclusive for various reasons.
In the case of Mauritius, the report notes that richer households’ real expenditure per capita grew faster than for all other groups during the period 2001–06, reversing previous trends. Structural changes in the economy, including the loss of trade preferences for textiles which lowered the demand for low-skilled labor, led to the lack of inclusiveness in a growth scenario. The report suggests that in the island economy, policies should aim to address inequality by investing in health and education, as well as supporting financial inclusion. The poorest and most vulnerable segments of the population should be targeted directly, for example, through cash transfer programs.
Looking ahead, the report recommends that policymakers should focus on structural reforms for growth and inclusiveness, and will need to grapple with the risks of a lasting reduction in momentum in commodity prices as the world economy transitions toward a new configuration of growth drivers.
Source: International Monetary Fund