Growth in sub-Saharan Africa is expected to pick up to 2.6% in 2017 from 1.4% in 2016, the International Monetary Fund (IMF) said in its latest Regional Economic Outlook for Sub-Saharan Africa report. While growth is expected to accelerate further, to 3.4 percent, in 2018, momentum remains weak and growth will likely remain below past trends in 2019.
One third of the economies, mostly in eastern and western Africa, continue to grow at a brisk pace of 5 percent or more. “But per capita incomes are expected to decline in 12 countries, home to 40 percent of the region’s population or 400 million people,” said Abebe Aemro Selassie, Director of the IMF’s African Department.
Public debt has been rising in the region. This is the case in those economies adjusting to the substantial commodity price shock and in many fast-growing economies. With debt now above 50 percent of GDP in half of the economies in the region, debt servicing costs have risen. Growing exposure to the sovereign and the accumulation of domestic arrears have magnified pressures in the financial sector. Moreover, while current account deficits have narrowed, international reserves are lower than desirable in many countries.
Looking ahead, Selassie stressed that “the quest for recovery rests on strong and urgent policy action to address vulnerabilities and tackle constraints to growth”. Many countries face a period of fiscal consolidation. While this is already reflected in most sub-Saharan African countries’ medium-term strategies, experience shows that planned fiscal adjustments tend to be postponed; implementation needs to begin without delay if debt levels are not to increase sharply.
Fiscal reforms can be designed to limit the adverse effect on growth and the most vulnerable. Experience with past fiscal consolidations in the region shows that this is best achieved through revenue mobilization as well as better prioritization of public spending.
Policies to promote diversification can help support growth. While there is no single path for reforms, countries such as Botswana, Rwanda, and Uganda, that have successfully diversified their economies have built on their existing strengths and tackled specific constraints. Diversification strategies were supported by policies to enhance macroeconomic stability, improve education outcomes, bolster governance and transparency in regulation, and deepen financial markets.