Rising debt and political risk dim Africa’s outlook
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.