IMF Calls for Prompt Policy Action to Secure a Rebound in Growth

IMF News, October 25, 2016

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Economic growth in sub-Saharan Africa in 2016 is projected to be just 1.4 percent—well below population growth and the slowest level in more than 20 years.
The slowdown reflects two broad factors:
- Deterioration of the external environment, notably with commodity prices at multi-year lows and markedly tighter financing conditions.
- Delayed and inadequate policy responses in many of the most-affected countries, raising uncertainty, deterring private investment, and stifling new sources of growth.
Aggregate growth masks considerable diversity across the region:
- Most non-commodity exporting countries—representing close to half of the countries in the region—continue to perform well.
- Countries cited as expected to continue to grow at more than 6 percent: Côte d’Ivoire, Ethiopia, Senegal, and Tanzania.
- Most commodity exporters are under severe economic strain; oil exporters have seen near-term prospects worsen significantly as the initial oil price shock spreads through their economies.
- Conditions in many non-oil commodity exporters remain difficult, including in South Africa where output expansion is expected to stall this year.

Subject to reforms being initiated quickly in the coming months, growth would recover close to 3 percent in 2017.
The recovery scenario depends on prompt action in the hardest-hit countries, especially oil exporters.
Further delays in addressing elevated macroeconomic imbalances are certain to undermine growth prospects further and delay a robust and job-rich recovery.

Given the scale and persistent nature of the shock and exhaustion of existing buffers, a comprehensive three-pronged adjustment effort is needed urgently:
- Strong fiscal adjustment.
- Enhanced social protection policies.
- Structural reforms to facilitate competitiveness and diversification.
Prompt, sustained policy adjustment is particularly needed in African resource exporters; oil producers are hardest hit and require immediate action to prevent a deeply entrenched slowdown.
A comprehensive and internally coherent set of policies to reestablish macroeconomic stability is needed in the hardest-hit countries to realize the region’s considerable economic potential.

Press Release No. 16/464, October 25, 2016 — International Monetary Fund