October 20, 2014
Introducing the October 2014 IMF Regional Economic Outlook: Sub-Saharan Africa, Ms. Antoinette Sayeh, Director of the IMF’s African Department commented today:
“The strong growth trends of recent years in the sub-Saharan Africa region are expected to continue. The region’s economy is forecast to continue growing at a fast clip, expanding by about 5 percent in 2014, the same level as in 2013, and accelerating to around 5¾ percent in 2015, underpinned by continued public investment in infrastructure, buoyant services sectors, and strong agricultural production. This growth momentum is particularly pronounced in the region’s Low-Income Countries, where activity is forecast to accelerate to 6¾-7 percent in 2014-15.
“This positive picture, however, co-exists with the dire situation in Guinea, Liberia, and Sierra Leone, where, beyond the unbearable number of deaths, suffering, and social dislocation, the Ebola outbreak is exacting a heavy economic toll, with economic spillovers starting to materialize in some neighboring countries.
“In addition, the baseline scenario of solid growth is predicated on a number of increasingly potent downside risks being lifted. Should the Ebola outbreak be more protracted or spread to more countries, it would have severe consequences for activity in the affected countries and larger spillovers. In a few countries, continued high growth and favorable global financial market conditions have not been sufficient to avert debt buildup and financing difficulties. Finally, with the external environment turning less supportive, a more pronounced slowdown in emerging markets, particularly China, or a disorderly normalization of monetary policy in the United States could have a protracted impact on the region’s economies.
“In that context, for the vast majority of countries in the region, sustaining high growth rates remains the key policy consideration, including to foster job creation and reduce poverty. Policies should continue to emphasize growth-enhancing measures. In particular, the focus should be on boosting fiscal revenue mobilization, channeling spending towards infrastructure investment and other development needs, safeguarding social safety nets to encourage more inclusive growth, and improving the business climate.
“But it will also be important to pay attention to macroeconomic constraints, avoid overreliance on volatile capital flows and prevent the widening of macroeconomic imbalances of a permanent nature. Monetary policies should continue to focus on consolidating the gains achieved in recent years in reducing inflation, including by tightening in countries with rapid growth and persistent high inflation.
“In the countries currently affected by the Ebola outbreak, fiscal accounts are coming under considerable pressure. Ideally, support should be provided through grants from the donor community, to enable the countries to accommodate higher Ebola-related spending and to help avoid an even more pronounced decline in economic activity. However, when grants are not immediately forthcoming, and provided that the public debt levels remain manageable, fiscal deficits should be allowed to widen, subject to the availability of financing.
“Finally, in the few countries where budgets have become overextended and financing constraints have emerged, fiscal consolidation is necessary, but will need to avoid overly adverse consequences for the poor and vulnerable groups.”