Press Release No. 11/366

Press Release: IMF Outlook for Sub-Saharan Africa Perceives Good Recent Progress on Growth and Inclusiveness, but Cautions on Downside Risks to Global Economy

October 19, 2011

The International Monetary Fund (IMF) today released the October 2011 Regional Economic Outlook: Sub-Saharan Africa. Ms. Antoinette Monsio Sayeh, Director of the IMF's African Department commented on the report's main findings:

Recent Developments

“Growth has remained strong in the region in recent years, and most low-income countries in Africa weathered the global economic slowdown well. The Regional Economic Outlook projects that growth in sub-Saharan African (SSA) economies will remain on average above 5 percent in 2011. The growth rate is expected to increase in 2012 to nearly 6 percent, because of one-off boosts to production in a number of countries. Beneath these good overall trends for SSA, however, there is considerable diversity.

• Most low income countries (LICs) have been doing very well. One third of LICs are expected to grow by more than 6 percent in 2011. But poor households have been hit hard by rising food and fuel prices, and famine is devastating the Horn of Africa.
• Some middle income countries were severely affected by the global crisis. In South Africa, with unemployment stubbornly high, growth will be limited to at most 3½ percent this year.
• • Oil exporters have enjoyed the fruits of elevated oil prices, and the non-oil sectors in their economies are projected to grow by 7½ percent this year.

“But there are significant downside risks to this outlook.

• Global financial volatility and a sharp slowdown in growth in advanced countries would affect SSA by subduing export demand and private financing flows, restricting growth particularly in the region’s more integrated economies.
• Volatility in commodity markets could cause further disruptions in macroeconomic balances, with both winners and losers within the region.

“There are also risks from within the region.

• Inflation rates have begun to rise again, driven in the first instance by rising food and fuel prices. Consumer prices rose on average by 10 percent in the year to June 2011, up from 7½ percent a year earlier. And some countries have seen much sharper increases in inflation, extending beyond the immediate impact of higher food and fuel prices."

Ms. Sayeh concluded: “Policies need to tread a fine line between addressing the challenges posed by strong growth and preparing to ward off the potentially adverse effects of another global downturn. At the same time, Sub-Saharan Africa needs to continue to invest in growth and employment, which are critical for sustained poverty reduction.”

Inclusive Growth

Introducing the Regional Economic Outlook chapter ‘How Inclusive has Africa’s Recent High Growth Episode Been?’ Ms. Sayeh said: “New evidence from household surveys shows that the average living standards of relatively poor households in some fast-growing economies rose strongly in the early 2000s. Comparing across countries, the poorest 25 percent of households fared best in countries where economic growth was higher.

“This evidence sheds some light on an apparent enigma in aggregate data showing—at best—a very weak relationship between poverty and growth. It suggests that one important link in the chain between economic growth and poverty reduction is growth in agricultural employment. Cross-country differences in agricultural employment growth explain a large part of observed differences in the relative consumption growth of the poorest households among the countries sampled. The chapter also shows that real income growth may have been significantly underestimated in some countries, mainly because of biases in the way that consumer price inflation has been measured,” Ms. Sayeh noted.

Re-orientation of Trade

Commenting on Regional Economic Outlook chapter ‘Sub-Saharan Africa’s engagement with emerging partners’ Ms. Sayeh observed: “A fast-paced reorientation in SSA toward new markets is under way, with nontraditional partners now accounting for about 50 percent of the region’s exports and almost 60 percent of its imports. While the region’s exports are still heavily concentrated in oil, gas, and minerals, particularly in the case of its largest emerging partners—China, India, and Brazil—many emerging markets purchase a wider range of products. FDI into the region is also diversified, including infrastructure, agriculture, and telecommunications.

“This reorientation brings the usual benefits of greater international trade, but should also boost long-term growth by reducing volatility in exports and output. The emergence of new partners provides the region with both significant opportunities - lower cost of inputs and consumption goods, transfer of technology, and economies of scale - and challenges - managing high concentration of exports on commodities and rapid sectoral changes,” Ms. Sayeh said.

The full text of the October 2011 Regional Economic Outlook: Sub-Saharan Africa can be found on the IMF's website, www.imf.org.