IMF Forecast projects Continued African Economic Growth
In April the IMF released its bi-yearly forecast on the current world economic climate and the results for sub-Saharan Africa look promising. The region is weathering the global financial crisis well and its recovery is expected to be stronger than following past global economic downturns.
This year growth is expected to accelerate to 4 ¾% and should increase to 6% by 2011. The report notes that ‘the region’s quick recovery reflects the relatively limited integration of most low income economies into the global economy and the limited impact on their terms of trade, the rapid normalisation in global trade and commodity prices, and the use of countercyclical fiscal policies’, the latter of which is a welcome development since is shows that Africa is taking serious charge of its economies.
Banking sector has remained resilient, and private capital inflows have resumed into the region’s more integrated economies.
South Africa is a mid-income country and its growth has been assuaged by high unemployment, tight credit conditions, and the recent strengthening of the rand. Its growth is projected to be 2 ½% this year and 3 ½% next.
Low-income countries such as Ethiopia, Kenya and Côte d’Ivoire have a projected growth rate of 4 ¾% for 2010 and 6 ¾% for 2011. Oil exporters like Nigeria, DRC and Angola are to fare better.
Yet obviously these rates are just predictions and there are risks and variables that also have to be taken into account. For example, despite consistent aid to Africa throughout the economic crisis, the flow of aid is set to decrease given the large output decline in major donor economies. Furthermore, political uncertainties – mainly in West Africa – have the potential to dampen economic growth and spill over into neighboring countries. Finally, a recovery pattern that gave rise to large swings in commodity prices would have varied effects on the region.
The report goes on to say that ‘as private and external demand begins to recover, countries will need to rebuild fiscal room, turning from the near-term objective of stabilizing output to medium-term considerations, such as increasing spending on growth enhancing priorities including infrastructure, health and education.’
Attracting private capital flows is also a major polity challenge but one that will heed considerable benefits should it succeed. One third of sub-Saharan economies are on the margins of international capital markets and are dependent on official forms of external financing. In order to secure private flows on a sustained basis these nations need to promote trade and financial sector development, strengthen institutions, raise standards of governance and encourage domestic saving and investment.
‘For the region’s more advanced economies, macro-economic policy will need to take into account the renewed inflows of foreign capital to avoid over-heating, unwarranted appreciation, and asset price booms’, the report says.
The IMF, as usual, is providing sound projections and advice for all those nations that are ready to accept it. Africa has captured the attention of the world after hosting a successful FIFA World Cup on all accounts. She now needs to continue her path towards greater growth and development and get her economies on track for a stable and brighter future.
The full IMF April 2010 Economic Outlook can be accessed at: http://www.imf.org/external/pubs/ft/weo/2010/01/index.htm
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