IMF projects hard year for sub-Saharan Africa region

Growth in the region as a whole is projected to fall to 3 per cent in 2016.

Farmers harvest maize at Moiben in Uasin Gishu County on October 15, 2015. Cereal growers, on March 21, 2016, said they have experienced difficulties repaying loans due to losses they incurred after most of the crop was damaged by drought and low producer prices. PHOTO | JARED NYATAYA | NATION MEDIA GROUP 

In Summary

• The report notes that commodity price slump has hit many of the largest sub-Saharan African economies hard.
• External financing conditions for most of the region’s frontier markets have tightened substantially.
• Severe drought in several southern and eastern African countries, including Ethiopia, Malawi, and Zimbabwe, is putting millions of people at risk of food insecurity.

By BRIAN NGUGI
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After an extended period of strong economic growth, sub-Saharan Africa is set to experience a second difficult year as the region is hit by multiple shocks, the International Monetary Fund (IMF) said yesterday.

According to its April 2016 Regional Economic Outlook for sub-Saharan Africa, Time for a Policy Reset, growth in the region as a whole is projected to fall to 3 per cent in 2016, the lowest level in some 15 years, albeit with considerable differences across the area.

This is well below the 6 per cent average over the last decade, and barely above population growth.

The report notes that commodity price slump has hit many of the largest sub-Saharan African economies hard.

SOMEWHAT RECOVERED

And while oil prices have recovered somewhat compared to the beginning of the year, they are still more than 60 per cent below 2013 peak levels—a shock of unprecedented magnitude for oil-producing nations, the IMF said.

Compounding this shock, external financing conditions for most of the region’s frontier markets have tightened substantially compared to the period until mid-2014 when they enjoyed wide access to global capital markets, it added.

In addition, severe drought in several southern and eastern African countries, including Ethiopia, Malawi, and Zimbabwe, is putting millions of people at risk of food insecurity.

However, the impact of these shocks varies significantly across the region with many countries continuing to register robust growth, including in per capita terms.

REMAINS FAVOURABLE

As such, the report stresses that the outlook remains favourable for countries such as Kenya, which are spared effects of the sharp decline in commodity prices.

“Many countries in the region continue to register robust growth. In particular, most oil importers are generally faring better with growth in excess of 5 per cent in countries such as Côte d’Ivoire, Kenya, and Senegal, as well as in many low-income countries,” said director of the IMF’s African Department Antoinette Sayeh.

In most of the oil importing countries, the IMF report noted, growth is being supported by ongoing infrastructure investment and strong private consumption.

The decline in oil prices has also benefited many of these countries, though the fall in cost of other commodities that they export, and currency depreciations, have partly offset the gains, the report said.