If there was one word African nations took away from the just concluded 2019 World Bank and IMF Spring Meetings in Washington D.C., that word was likely “hope” followed by caution and then fear.
Let’s start with hope:
According to the International Monetary Fund, there is reason to hope that the economy in Sub-Saharan Africa would continue to recover in 2019.
“This year we are expecting growth to accelerate to 3.5 percent from 3 percent last year,” saidMr Abebe Aemro Selassie, Director of the IMF’s African Department
Even more interesting is that some 21 countries in Sub-Saharan Africa are expected to grow at 5 percent or more this year.
In addition, these economies that are growing fast tend to be the more diversified economies, anther piece of great news.
However, the remaining countries, comprising mostly resource intensive countries, including the largest – Nigeria and South Africa – are expected to see slower improvements in standards of living.
This second group, around 24 countries, mainly resource-dependent economies would face face “sluggish growth” in the near term and slower improvements in standards of livings.
This group includes some of the larger economies in the region, the likes of Angola, Nigeria, and South Africa, which account for more than 50 percent of the region’s output.
So that’s the first part. Things may be a bit rocky at the moment, especially with slower growth last year, but the IMF forecasts that the storm would gradually be over as this year progresses and we move into 2020.
But, then there is need to be extremely cautious.
Even as the economy is expected to grow globally this year, Christine Lagarde warned on April 11 during her press briefing that “we are at a delicate moment” and would need to be cautious.
According to the IMF, the global economy is expected to rebound from 3.3 in 2019 to 3.6 in 2020, however, this would depend on many factors, ranging from unresolved trade tensions, high debt in some sectors and countries, both public and corporate, and the risk of weaker‑than‑expected growth in some stressed economies, and, of course, the consequences of whatever Brexit will happen or not.
These external factors would also affect the African economy.
On the external front perhaps the most important factors have been the volatility and global financial conditions, as well as the volatility in commodity prices which are posing a challenge for policymakers.
Domestically, rising public debt vulnerabilities, which are elevated in some countries would continue to pose a great challenge.
“The reason for the increase in debt levels tends to be very country-specific, for some it is due to addressing the large infrastructure needs. In others it’s been the effect of the commodity price shock that hit countries between 2014 and 2016. And yet in others it’s been pro-cyclical policies which have led to the marked increase in debt levels”, Selassie said.
All these factors, the IMF said, mean that there are basically two broad implications for policies.
“First in the fast-growing economies, the likes of Benin, Ethiopia, Ghana, Senegal, there is a need to hand over the reins of growth from the public to the private sector”, because in many of these countries while public investments has helped spur higher growth, translating into an increase in public debt levels, there is a need to strike a better balance between public debt increase on one hand, and the continued investments that are needed in public investment.
In the slower-growing economies, the likes of Angola, Nigeria, South Africa, there is a need to pursue reforms to facilitate economic diversification, and address remaining economic imbalances.
This, according to the IMF is because private investments remain weak, and a strong focus is needed to address the constraints that are holding such investments back.
Finally, there is fear, big fear
According to the World Bank President, David Malpass, per capita income growth in sub-Saharan Africa as a whole is projected to stay below one percent until at least 2021 which elevates the risk of a further concentration of extreme poverty on the continent.
In addition, growth in median income will also be weak.
This fact, he said, was extremely troubling because it jeopardizes the World Bank’s primary goal of ending extreme poverty by 2030.
Mr Malpass said although extreme poverty has dropped globally to 700 million at the last count, down from much higher levels in the 1990’s and 2000’s, the number of people living in extreme poverty is on the rise in sub-Saharan Africa.
“By 2030, nearly 9 in 10 extremely poor people will be Africans, and half of the world’s poor will be living in fragile and conflict-affected settings. This calls for urgent action—by countries themselves and by the global community,” he said.