7 October 2009
The International Monetary Fund (IMF) expects a positive recovery in sub-Saharan Africa, despite the negative effects of the global economic crisis.
“We expect growth in sub-Saharan Africa to rise to four percent in 2010 and five percent in 2011,” IMF African department director Antoinette Monsio Sayeh said in Washington DC this week.
Commenting on the main findings of the IMF’s 2009 Regional Economic Outlook for Sub-Saharan Africa, Sayeh noted that many of the regional member states were hard hit by the crisis, reducing economic growth to just one percent in 2009 after a period of sustained high economic growth.
Prudent economic policies
Sayeh said oil exporters and middle income countries in the region have been particularly badly affected, while most low-income countries somewhat less so, adding that in most countries, however, the crisis will likely slow, if not reverse, progress on poverty reduction.
“In many countries the prudent macroeconomic policies pursued in recent years have provided some policy space to counter the effects of the slowdown.
“Accordingly, most countries have been able to maintain or even raise public spending, allowing fiscal deficits to widen temporarily. Where possible, monetary policy has also played a supportive role,” she said.
Downside risks remain
Sayeh noted, however, that there were significant downside risks, to which, wherever possible, the IMF would remain supportive until economic recovery was well-established.
“As the recovery gains strength, the emphasis of fiscal policy will need to shift from stabilisation to medium-term considerations, including debt sustainability.
“In countries with binding financing constraints, the room for fiscal policy is more limited and the primary focus will need to remain on reducing macroeconomic imbalances.”
Financial sectors have been for the most part resilient, but prudential supervision will need to remain vigilant in the face of the impact of the economic slowdown on the quality of banks’ portfolios, the report noted.
Increased IMF commitment
Sayeh said that scaled-up financial support from the IMF has supported countries’ policy response, saying the doubling of lending limits and more flexible policies had facilitated a rapid response to countries’ needs.
New IMF commitments to sub-Saharan Africa had reached over US$3-billion so far this year, compared to some $1.1-billion for the whole of 2008 and only $0.1-billion in 2007, she said.
“Looking ahead, it will be critical that other development partners support this effort and those of other international financial institutions.”
According to the IMF, the fiscal balance – including grants – for the region as a whole has swung from a surplus of just over 1.25% of GDP in 2008 to an expected deficit of 4.75% in 2009.
“This contrasts with the much more limited increase in deficits observed in past global slowdowns, not only because the output shocks were smaller but also most likely because in previous downturns high initial deficits, often accompanied by high debt, limited room for manoeuvre,” the report noted.