Ris­ing debt and po­lit­i­cal risk dim Africa’s out­look

The Herald (South Africa) - - BUSINESS - MacDon­ald Dzirutwe

ECO­NOMIC growth is ex­pected to rise to 3.4% in sub-Sa­ha­ran Africa next year from 2.6% this year, the IMF said yes­ter­day.

It, how­ever, warned that ris­ing debt and po­lit­i­cal risks in larger economies would weigh down fu­ture growth.

Nige­ria and South Africa are the big­gest economies in Africa south of the Sa­hara, but both na­tions have been clouded by po­lit­i­cal un­cer­tainty linked to the ten­ure of their lead­ers.

The IMF said a good har­vest and re­cov­ery in oil out­put in Nige­ria would con­trib­ute more than half of the growth in the re­gion this year.

Also, an uptick in min­ing and a bet­ter har­vest in South Africa – as well as a re­bound in oil pro­duc­tion in An­gola – would add to growth, it said. But po­lit­i­cal un­cer­tainty looms. In Nige­ria, Pres­i­dent Muham­madu Buhari is af­flicted by ill­ness, caus­ing spec­u­la­tion about whether he is fit to run Africa’s big­gest econ­omy.

In South Africa, the coun­try has been clouded by the rule of Pres­i­dent Ja­cob Zuma, who has bat­tled scan­dals and cor­rup­tion al­le­ga­tions.

“Key down­side risks to the re­gion’s growth out­look em­anate from the larger economies, where el­e­vated po­lit­i­cal un­cer­tainty could de­lay needed pol­icy ad­just­ments and dampen in­vestor and con­sumer con­fi­dence,” the IMF said.

“A fur­ther pickup in growth to 3.4% is ex­pected in 2018, but mo­men­tum is weak – and growth will likely re­main well below past trends in 2019.”

To help main­tain growth, coun­tries should di­ver­sify from de­pen­dence on com­modi­ties and oil, im­ple­ment fis­cal re­forms to stim­u­late growth and at­tract pri­vate in­vest­ment.

The IMF said pub­lic debt would rise to 53% of GDP from 48% last year.

More wor­ry­ing was that most coun­tries were bor­row­ing from their do­mes­tic banks, which could desta­bilise the do­mes­tic fi­nan­cial sec­tor and fuel in­fla­tion. Debt ser­vic­ing costs were also up. “Debt ser­vic­ing costs are be­com­ing a bur­den, es­pe­cially in oil-pro­duc­ing coun­tries, and are ex­pected to ab­sorb more than 60% of gov­ern­ment rev­enues in 2017,” the IMF said.

While some African coun­tries had made progress in re­duc­ing their fis­cal deficits, oth­ers – like South Africa – would see the deficit widen.

South Africa last week raised its es­ti­mate for this year’s bud­get deficit, say­ing the coun­try faced slug­gish eco­nomic growth, short­falls in rev­enue and costly bailouts of strug­gling state-owned com­pa­nies.

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