May 19, 2017
Version in Français (French)
The IMF’s latest economic health check of sub-Saharan Africa shows that growth fell to its lowest level in 20 years.
In this podcast, the IMF African Department’s Celine Allard, who oversaw the report, says that this drop brought a halt to the 5 to 6 percent growth rate that was enjoyed in the last two decades. Some factors contributing to this slowdown are lower commodity prices, the devastation of a severe drought—exacerbating crop infestation and leading to a famine affecting some 20 million people—and political conflicts that affect trade.
“Our 2016 figures show that the average growth for the region has reached only 1.4 percent, the weakest performance in more than two decades, and well below the region’s population growth,” Allard said.
Despite this sluggish growth that she called a “rough patch,” Allard says there are three key pillars the region’s governments can use to help revive growth:
- Renew their focus on debt reduction, employ fiscal policy to raise domestic revenues, and greater exchange rate flexibility;
- Renew their emphasis on economic diversification, and improving the business climate so that the private sector can feel confident to invest; and
- Pay attention to providing social safety nets to protect the most vulnerable in society.
“In the medium term, there are no reasons why growth in sub-Saharan Africa should not be very strong, and it’s important to read that potential correctly, because there are very large aspirations from the region’s population, which is young and growing,” Allard said.
Already, there are some bright pockets of growth, particularly in some of the larger countries in Western and Eastern Africa—Côte d'Ivoire, Ethiopia, Kenya, Senegal, and Tanzania—which are still growing at robust rates of 5 to 7 percent.
Allard says that while the region remains less integrated in trade than other regions in the world—which might cushion the region in the event of a shift towards more inward-looking policies across the globe—the region is not immune to global developments.
“What we’ve seen over the last few years is that countries that we call frontier market economies have tapped international markets,” says Allard. “This is a good development because it widens the sources of financing but makes those countries more sensitive to the global environment.”