Sunday, October 11, 2009

IMF predicts weak growth in sub-Saharan Africa

Bloomberg: Sub-Saharan Africa’s Per Capita Income to Fall
IMF: IMF Survey: Prudent Policies Help Sub-Saharan Africa Ride Downturn, Regional Economic Outlook: Sub-Saharan Africa

The International Monetary Fund, in its Regional Economic Outlook, expressed expectations for meager growth in sub-Saharan Africa in 2009. The IMF predicts that sub-Saharan Africa’s economy will expand 1.3 percent this year, down from 5.5 percent in 2009. The estimate is down from the IMF’s July forecast of 1.5 percent. The fund does expect growth to bounce back as the global economy recovers however, rebounding to 4.1 percent in 2010.

Angola’s economy, once marked by explosive growth (20.3 percent in 2007, 13.2 percent in 2008), will be a significant drag on the region. The IMF predicts 0.2 percent expansion in the Angolan economy this year. Nigeria- the most populous nation in the region- will see a decline from 6 percent growth to 2.9 percent this year. The fund also emphasized that its predictions were subject to “significant uncertainty”; improved growth in sub-Saharan Africa will be closely tied to a strong global recovery. As donor countries attempt to set their own advanced economies right, many may scale back their commitments to developing economies. The IMF remains concerned that reduced aid and investment flows into sub-Saharan Africa could jeopardize recovery and exacerbate poverty in the region.

The IMF outlook isn’t wholly bleak however. The report notes that the region is faring better this time around than it has in crises past. Many sub-Saharan countries were better prepared when crisis struck. The region’s current account balance was fairly strong in 2008, and international reserves were relatively high. From this position, most countries were able to survive the sharp declines in foreign exchange inflows caused by the global crisis.

The IMF urges countries in the region to continue pursuing supportive fiscal policies. The report urged sub-Saharan policymakers not to withdraw fiscal stimulus measures too early, to focus on medium term considerations (like growth and debt sustainability), to contain macroeconomic imbalances and to continue monitoring financial sector developments closely. Shrewd policymaking, paired with a steady global recovery, could lead many sub-Saharan countries back to their impressive, pre-crisis growth rates.

1. The IMF warns of “significant uncertainty” in their growth forecasts for the sub-Saharan region, emphasizing the linkages between global and regional recovery. What, if anything, can African leaders do to protect their economic recoveries from potentially negative international effects?
2. The IMF and G20 have pledged increased funds to developing and emerging economies in the wake of the crisis. How can these countries best allocate the new funds to meet economic and humanitarian needs?

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