Economic growth in sub-Saharan Africa expected to pick up at slower pace, IMF says and suggests solutions

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Growth in sub-Saharan Africa is expected to pick up at a slower pace than projected earlier this year, the International Monetary Fund said on Friday.

“Relative to April 2019, we have seen growth revised down for about two-thirds of the countries this year, albeit by a modest 0.3 percentage points for the region as a whole,” Mr. Abebe Aemro Selassie, the Director of the African Department at the IMF, said at a press conference.

“Growth is projected to remain at 3.2 percent in 2019 and rise to 3.6 percent in 2020,” he added, speaking at the 2019 IMF and World Bank Annual Meetings.

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According to him, the revised down growth reflects a more challenging external environment and country specific circumstances.

Selassie said growth prospects vary considerably across countries. Forn instance, non-resource-intensive countries are expected to grow at about 6 percent, almost three times faster than resource-intensive countries.

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Mr. Abebe Aemro Selassie, the director of the African Department at the IMF, takes questions from journalists following his press conference on the state of the African economy at the 2019 IMF and World Bank Annual Meetings in Washington DC on Friday, October 18, 2019.

As a result, 24 predominantly non-resource-intensive countries, home to about 500 million people, will see their per capita income rise faster than the rest of the world.

However, growth is projected to remain weak in resource-intensive
countries at 2½ percent, and as such, 21 resource-intensive countries are projected to have per capita growth lower than the world average of 1.8 percent.

In addition, the outlook faces considerable downside risks.

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Mr. Abebe Aemro Selassie, the director of the African Department at the IMF, takes questions from journalists following his press conference on the state of the African economy at the 2019 IMF and World Bank Annual Meetings in Washington DC on Friday, October 18, 2019. Photo: SIMON ATEBA, TODAY NEWS AFRICA

“On the external front, risks include the threat of rising protectionism, a sharp increase in risk premiums, and a faster-than-anticipated slowdown in key trading partners like China and the euro area. Other risks relate to slippages in implementing fiscal policies to stabilize the
debt burden,” he explained.

Against this backdrop, a three-pronged strategy can help reduce risks and promote sustained and inclusive growth.

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Mr. Abebe Aemro Selassie, the director of the African Department at the IMF, takes questions from journalists following his press conference on the state of the African economy at the 2019 IMF and World Bank Annual Meetings in Washington DC on Friday, October 18, 2019. Photo: SIMON ATEBA, TODAY NEWS AFRICA

“First, the near-term policy mix needs to be carefully calibrated. Fiscal space remains limited in many countries. Thus, the room for supporting growth in the face of rising external headwinds remains mainly on the monetary policy side, particularly for countries where inflation pressures are muted, and growth is below potential

“Second, countries should continue to build resilience to economic shocks, increasingly frequent weather-related disasters, and heightened security challenges.

“This requires addressing elevated debt vulnerabilities by continuing fiscal consolidation. As one of the analytical chapters in the Regional Economic Outlook shows, domestic arrears have become pervasive, and are estimated to be around 3 percent of GDP, further adding to debt vulnerabilities.

“Therefore, improving public financial management is key to preventing future arrears accumulation. Furthermore, promoting economic diversification and reducing nonperforming loans are also essential for building resilience.

“Third, countries need to raise medium-term growth to create jobs for the expanding labor force. Implementing structural reforms to boost investment and competitiveness should be a priority for the region. This can be supported by comprehensively tackling tariff and non tariff barriers in the context of the African Continental Free Trade Agreement,” Mr. Selassie added.

He said enhancing market competition can significantly improve economic performance in the region.

“As one of the analytical chapters in the Regional Economic Outlook shows, the level of competition in sub-Saharan Africa remains low relative to the rest of the world. Increasing the level of competition to the top quartile of the global distribution could improve productivity, thereby boosting GDP growth in the region by about 1 percentage point.

“Boosting competition in the region requires holistic reforms encompassing an effective competition policy framework, openness to trade and foreign direct investment, and business regulations and macro policies that create an even playing field among firms”.

Mr. Selassie stressed that sub-Saharan Africa remains a
region with tremendous potential for growth, and while the global environment is increasingly uncertain, there is much that countries in the region can do to boost growth and resilience to shocks.

The IMF, he explained will continue to partner with African countries to boost growth, increase transparency, fight corruption and and equip policymakers with the tools they need for a more prosperous continent.

He announced that together with the Government of Senegal, the Fund will be hosting a nconference on “Sustainable Development, Sustainable Debt” on December 2, 2019 in Dakar.

The objective of the conference is to identify policy proposals to address the dilemma between mobilizing financing for development needs and addressing debt vulnerabilities.

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Simon Ateba
Simon Ateba covers the White House, the U.S. government, the International Monetary Fund, the World Bank and other financial and international institutions for Today News Africa in Washington D.C. Simon can be reached on simonateba@todaynewsafrica.com

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