The International Monetary Fund (IMF) has said there will be a recovery in Sub-Sahara African economic growth this year, rising slightly to 2.6 per cent after a more than two-decade low in 2016 as commodity exporters faced lower prices.
IMF in its regional economic outlook said the slight rebound would be driven by a recovery in oil production in Nigeria, higher public spending ahead of elections in Angola, and the fading of drought effects in South Africa.
Noting that a modest rebound in growth to 2.6 per cent is expected for the region in 2017, the IMF said “even that rebound will be to a large extent driven by one-off factors in the three largest countries. Unfortunately, this deteriorated outlook is partly a result of delayed and still limited policy adjustments, with an ensuing increase in public debt, declining international reserves, and pressures on financial systems placing stress on private sector activity.”
The IMF in the outlook stated that with policies behind the curve, pressures on sovereigns rising, and spillovers to the private sector intensifying, the near-term outlook for growth in the region is foreseen to remain subdued.
“The modest rebound in aggregate growth—to 2.6 per cent in 2017 in our baseline—is expected to be driven to a large extent by a mitigation of adverse circumstances that caused growth to slump sharply in the largest countries in 2016 (Table 1.1):
“Reflecting some idiosyncratic developments, the three largest economies, Angola, Nigeria, and South Africa are expected to contribute about three-quarters of the regional rebound.
Following a deep recession, economic activity in Nigeria is expected to recover, with growth forecast at 0.8 per cent on the back of higher oil production—if relative peace in the Niger Delta can be maintained—and strong agricultural production.
However, the IMF said resource-rich Nigeria, Angola and Central Africa’s six-nation CEMAC bloc are still struggling to deal with the losses caused by low oil prices.
“The overall weak outlook partly reflects insufficient policy adjustment,” Director of the IMF’s African Department, Abebe Aemro Selassie, stated adding that this was holding back investment.
The outlook also raised concerns over the rising public sector debt in the region saying “average, the ratio of public debt to GDP has increased by some 10 percentage points since 2014 to an average of 42 per cent of GDP in 2016 (and a median of 51 per cent).
This is the highest value since many countries received debt relief in the 2000s under the Heavily Indebted Poor Countries/Multilateral Debt Relief Initiative.”