IMF warns of new severe economic shock to subSaharan Africa region

THE SUB-SAHARAN African economic outlook faces a new and severe economic threat due to surging food and fuel prices that have been prompted by Russia’s invasion of Ukraine, the International Monetary Fund (IMF) said yesterday.

“The effects of the war will be deeply consequential, eroding standards of living and aggravating macro-economic imbalances, and could not have come at a worse time, as growth was starting to recover and policymakers were beginning to address the social and economic legacy of the Covid-19 pandemic and other development challenges,” the IMF said in a report on the region released yesterday. Half of the region’s low-income countries are already in or at high risk of distress.

As an indication of how this was affecting South Africa, professional services firm PricewaterhouseCoopers (PwC) said yesterday local production costs were already rising even before the disruptions caused by the Russian invasion and flooding in KZN, and local production costs were rising quickly.

“The producer price index (PPI) for final manufactured goods increased by 10.5 percent year-on-year (y/y) in February 2022 (double the rate measured a year earlier) and averaged 10.3 percent y/y over the past four months.

“(These were) among the highest readings since the introduction of the current PPI a decade ago and also nearly double the 10-year average of 5.5 percent per annum,” PwC said in a report on the local economic outlook.

“The S&P Global report noted that private sector companies largely passed on March’s increased production costs to their consumers. Unsurprisingly, local firms also observed that clients were reducing their demand due to concerns over rising living costs,” PwC said.