African growth spurt to slow: IMF

Lesotho Times - - Business -

JO­HAN­NES­BURG — Af­ter en­joy­ing boom years, sub-sa­ha­ran Africa’s com­mod­ity ex­port­ing economies face a grim 2015 as China’s once-vo­ra­cious ap­petite for raw ma­te­ri­als wanes, the IMF warned Tues­day.

Ac­tiv­ity may gather pace next year, how­ever, as oil prices re­cover, the In­ter­na­tional Mone­tary Fund said in its closely watched World Eco­nomic Out­look re­port.

The Wash­ing­ton-based lender low­ered its growth fore­cast for this year to 3.7 per­cent, 50 ba­sis points down from its pro­jec­tion in June, and com­pared with 4.6 per­cent ex­pan­sion recorded in 2014.

“The slow­down in 2015 is pri­mar­ily driven by the reper­cus­sions of de­clin­ing com­mod­ity prices, par­tic­u­larly those for oil, as well as lower de­mand from China — the largest sin­gle trade part­ner of sub-sa­ha­ran Africa,” the Fund said.

The World Bank’s new Africa Pulse, the bi-yearly anal­y­sis of eco­nomic trends and the lat­est data on the con­ti­nent, shows that the 2015 fore­cast re­mains be­low the 6,5 per­cent growth in GDP which the re­gion sus­tained in 2003-2008.

More broadly, do­mes­tic de­mand through in­vest­ment, pri­vate con­sump­tion and gov­ern­ment spend­ing will sup­port growth in the re­gion,” the re­port says.

Dur­ing a con­fer­ence call on the find­ings con­tained in the re­port, Africa Pulse team leader Pu­nam Chuhan-pole said coun­tries in the re­gion face chal­lenges aris­ing from a huge wage bill and widen­ing bud­get deficit.

“In many coun­tries we have seen ris­ing wage bills and there is need to make an ef­fort to con­trol that. Oth­er­wise you are go­ing to have widen­ing deficit and you are not go­ing to have resources to spend on other po­ten­tial ser­vices such as in­fras­truc­ture de­vel­op­ment,” said Ms Chuhan-pole.

The re­port says that pol­icy buf­fers are low in sev­eral coun­tries, con­strain­ing the re­sponse to the cur­rent en­vi­ron­ment and un­der­scor­ing the need for African coun­tries to im­prove do­mes­tic re­source mo­bil­i­sa­tion and en­hance pub­lic ex­pen­di­ture ef­fi­ciency. Sub- Sa­ha­ran Africa’s rich nat­u­ral resources have made it a net ex­porter of fuel, min­er­als and met­als and agri­cul­tural com­modi­ties.

Ro­bust sup­plies and lower global de­mand have ac­counted for the de­cline of com­mod­ity prices across the board. For in­stance, the re­port says, the drop in the prices of nat­u­ral gas, iron ore and cof­fee ex­ceeded 25 per­cent since June 2014. Africa Pulse says growth in Sub-sa­ha­ran Africa will be tested as new shocks oc­cur in the global eco­nomic en­vi­ron­ment un­der­scor­ing the need for gov­ern­ments to em­bark on struc­tural re­forms to al­le­vi­ate do­mes­tic im­ped­i­ments to growth.

“In­vest­ments in new en­ergy ca­pac­ity, at­ten­tion to drought and its ef­fects on hy­dropower, re­form of state-owned dis­tri­bu­tion com­pa­nies and re­newed fo­cus on en­cour­ag­ing pri­vate in­vest­ment will help build re­silience in the power sec­tor,” the re­port says.

Growth in the re­gion’s big­gest oil ex­porters, Nige­ria and An­gola, is ex­pected to slow sharply when com­pared to last year, it said.

The IMF said growth for the sub-sa­ha­ran re­gion was ex­pected to pick up in 2016 to 4.3 per­cent, how­ever, as ex­ter­nal de­mand and oil prices re­cov­ered.

Africa’s most ad­vanced econ­omy, South Africa, was pro­jected to show growth of less than 1.5 per­cent in 2015 and 2016 due to poor elec­tric­ity sup­ply and high un­em­ploy­ment.

The ef­fect of plung­ing com­mod­ity prices has al­ready led min­ing com­pa­nies in coun­tries such as South Africa and Zam­bia to slash work­forces, shut op­er­a­tions and re­duce ca­pac­ity.

Zam­bia, which re­lies on cop­per ex­ports for 70 per­cent of its for­eign earn­ings, has seen the value of its cur­rency, the kwacha, fall by nearly half against the dol­lar so far this year.

In con­trast, the IMF pre­dicted Ivory Coast, Demo­cratic Re­pub­lic of the Congo, Ethiopia, Mozam­bique and Tan­za­nia would record growth of seven per­cent or more this year and next. Sub-sa­ha­ran African na­tions had in­creased their fis­cal deficits since the start of the global financial cri­sis as wages rose and rev­enues fell, the World Bank said. “To with­stand new shocks, gov­ern­ments in the re­gion should im­prove the ef­fi­ciency of pub­lic ex­pen­di­tures, such as pri­ori­tis­ing key in­vest­ments, and strengthen tax ad­min­is­tra­tion to cre­ate fis­cal space in their bud­gets,” Chuhan-pole said.

Mean­while, Busi­ness con­fi­dence in South Africa has dipped to its low­est level since the end of apartheid on the back of an un­sta­ble cur­rency and lower com­mod­ity prices, a sur­vey showed Tues­day.

The South African Cham­ber of Com­merce and Industry’s Busi­ness Con­fi­dence In­dex in Septem­ber fell to the low­est level since 1993, a year be­fore the end of apartheid.

Last month’s busi­ness con­fi­dence in­dex “is the low­est level recorded since July 1993 and is a 22-year low,” said the group.

South Africa is Africa’s most de­vel­oped and was long the con­ti­nent’s eco­nomic pow­er­house, but last year it lost its num­ber one spot on the con­ti­nent to Nige­ria.

The SA econ­omy is plagued by slow growth of less than 2 per­cent, a weak rand, in­ad­e­quate and un­re­li­able elec­tric­ity sup­plies and high un­em­ploy­ment.

“The financial cli­mate re­mains tight com­pared to a year ago with in­sta­bil­ity (of the rand and pre­cious met­als),” said the cham­ber in its monthly sur­vey.

It echoed the IMF’S warn­ing that the prospects of African economies, par­tic­u­larly those heav­ily re­liant on com­mod­ity ex­ports risk be­com­ing “des­per­ate”. — AFP

SA’S growth is pro­jected to be be­low 1.5 per­cent both this year and next year, ac­cord­ing to the IMF.

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