Economic activity has weakened markedly in sub-Saharan Africa, and the strong growth momentum of recent years has dissipated in quite a few countries.
While the business and macroeconomic environment has improved considerably over the past decade or so, other factors that underpinned strong growth—particularly high commodity prices and accommodative financing conditions—have become less supportive. The prices of many commodities exported by the region have fallen by around 40-60 percent in the past two years, and borrowing costs have risen amid a reassessment of global risk in anticipation of a U.S. interest rate hike. In addition, larger external and fiscal deficits weigh on some countries.
As a result, while growth in sub-Saharan Africa is still stronger than many other regions, the IMF’s latest Regional Economic Outlook for Sub-Saharan Africa puts growth at 3¾ percent this year, even lower than in 2009 in the aftermath of the global financial crisis. The forecast for 2016 is slightly higher at 4¼ percent.
But despite the difficult overall picture, the report finds that there is considerable variation across the region. In most low-income countries, growth is generally holding up, supported by infrastructure investment and private consumption. Countries such as Cote d’Ivoire, Ethiopia, and Tanzania are expected to grow at 7 percent or more this year and next. Other low-income countries, however are feeling the pinch from commodity prices, even though cheaper oil has eased their energy import bill.
Hardest hit are the region’s oil exporters as falling oil prices have drastically reduced export revenue and forced a sharp fiscal adjustment. The oil producers account for about half of the region’s GDP and include the largest producers, Nigeria and Angola. Several middle-income countries, including Ghana, South Africa, and Zambia, are also facing unfavorable conditions, ranging from weak commodity prices to difficult financing conditions and electricity shortages. Read full article