Slower African economies need new policies — IMF
ECONOMIC growth in sub-Saharan Africa will slow further to a 17-year low this year, requiring “a substantial policy reset” by policy makers to lift growth.
This is according to the International Monetary Fund’s (IMF’s) sub-Saharan Africa regional economic outlook report released yesterday.
SA’s economic growth would halve to just 0.6% this year, from 1.3% last year on low investor confidence, tighter policies, a decline in commodity prices and drought, the IMF said.
Growth in the region, whose economies are reeling from a commodity price slump and severe drought, would slow to 3% this year, from 3.4% last year and 5% in 2014, the IMF said. “The outlook in 2016 remains grim for oil exporters and a number of other commodity exporters,” the report said.
Policy responses to the deceleration in the region’s economic growth so far had “generally been insufficient”, according to the IMF’s African department director, Antoinette Sayeh.
Countries such as SA, with large budget and current account shortfalls, needed to adjust their fiscal policies, given global developments that had caused the flight of capital from emerging markets.
“Such recalibration would help them to rebuild scarce buffers and mitigate vulnerabilities if external conditions worsen further,” Ms Sayeh said.
The drop in commodity prices, coupled with weak global demand, was reducing the revenues of many commodity-exporting countries. Countries facing this situation should contain budget deficits, allow for a freefloating exchange rate and build a sustainable tax base from the rest of the economy, the IMF warned. Growth for oil exporters as a whole is forecast to slow to 2.25% this year. Africa’s biggest economy, Nigeria, would continue to face difficult conditions, compounded by disruptions to private sector activity through exchange-rate restrictions, the IMF said. Despite the gloomy outlook for this year, the IMF expects growth to pick up to 4% next year, supported by a small rebound in commodity prices, an improved business environment and a growing population.