15 April 2008
Sub-Saharan Africa experienced one of its highest growth rates in decades in 2007, with real gross domestic product (GDP) expanding by about 6.5% as a result of growing production from oil exporters and rising domestic investment and productivity across the region, according to the International Monetary Fund’s latest regional outlook.
“The growth was supported by successes in stabilizing economies and implementing structural reforms,” the IMF said in a statement last week. “Solid global demand for commodities, greater flows of capital to Africa, and debt relief has helped increase resources and lift growth.”
According to the organisation, growth in sub-Saharan should again average about 6.5% in 2008, but with a widening gap in economic growth between oil exporters and oil importers.
In addition, higher food and energy prices are expected to push regional inflation up slightly to about 8.5% this year.
The IMF pointed out, however, that the region was better placed to withstand a worsening global environment as compared to the 1990s, with many countries in the region being less exposed to shifts in global economic conditions.
“Smaller current account and fiscal deficits, lower inflation, reduced debt, increased foreign reserves, and strengthened policy frameworks have all helped make the region more resilient to external shocks,” the IMF said.
With the global economy slowing down, global financial markets becoming unsettled and oil prices having risen to record highs, the IMF said that the external environment had nonetheless become unfavourable, increasing risk during 2008.
“This marks a shift from recent years, when demand for sub-Saharan African exports was healthy, and nonfuel commodity prices were growing at double digits,” the IMF said. “Rising oil and food prices pose increasing challenges to many countries and risks to the inflation outlook.”
The IMF warned that the exports of sub-Saharan Africa would be affected if high oil prices were accompanied by a pronounced slowdown in the global economy, resulting in weaker non-oil commodity prices.
Also, while African markets have so far shown limited reaction to continuing turbulence in global financial markets, a reversal of portfolio flows could reduce external financing and hurt growth in a few countries.
“In light of these risks, there is about a one-in-five chance in 2008 that growth in sub-Saharan Africa will fall to less than 5%,” the IMF said.
The IMF pointed out that internal risks had also increased in some regions, with post-election violence in Kenya and unrest in Chad also affecting neighbouring countries and leading to food shortages and price hikes in some instances.
The main medium-term challenge for sub-Saharan Africa was to accelerate growth and achieve the Millennium Development Goals (MDGs), because while a growing number of countries enjoyed robust growth, only a few sub-Saharan African countries seem well positioned to halve poverty by 2015.
Notwithstanding the improvement in economic growth since the mid-1990s, real per capita income was about the same as in the mid-1970s, the IMF said, pointing out that sustained per capita growth was necessary for the poverty rates in the region to drop.
“In sum, while the recent improved economic performance in sub-Saharan Africa is encouraging, the region has a lot of catching up to do if it is to achieve the MDGs,” the IMF said.
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