Navigating Heightened Uncertainty

October 18, 2019

• Growth in sub-Saharan Africa is projected to pick up from 3.2 percent in 2019 to 3.6 percent in 2020 – a slower pace than envisaged in April 2019, partly due to a more challenging global environment.
• Although fiscal reforms should continue in many countries to contain debt vulnerabilities, some countries have scope for monetary easing to help counter external headwinds.
• Structural reforms to boost investment and competitiveness, including by fully operationalizing the African Continental Free Trade Agreement (AfCFTA), can boost medium-term growth.

Growth in sub-Saharan Africa is projected to remain at 3.2 percent in 2019 and rise to 3.6 percent in 2020.

This growth pickup will be slower than previously envisaged, partly due to the more difficult external environment, the International Monetary Fund (IMF) said in its latest Regional Economic Outlook for Sub-Saharan Africa. In addition, the economic outlook varies considerably across countries. While growth is projected to be strong in non-resource-intensive countries, averaging about 6 percent, it is expected to remain weak in resource-intensive countries at about 2.5 percent.

“Similar to the global outlook, the region faces elevated downside risks,” said Abebe Aemro Selassie, Director of the IMF’s African Department. “External headwinds have intensified as evidenced by the marked slowdown in export growth. Domestically, policy uncertainties continue to hold back investment in the region’s larger economies. Furthermore, while the average debt burden is stabilizing, elevated public debt vulnerabilities and low external buffers will continue to limit policy space in several countries.”

Against this backdrop, Mr. Selassie pointed to a three-pronged strategy to reduce risks and promote sustained and inclusive growth.

“First, the near-term policy mix needs to be carefully calibrated. Many countries need to implement planned fiscal adjustment to address debt vulnerabilities. Therefore, the room for supporting growth in the face of rising external headwinds remains mainly on the monetary policy side and restricted to countries where inflation pressures are muted, and growth is below potential.

“Second, countries should continue to build resilience, both to economic shocks and to increasingly frequent weather-related disasters and heightened security challenges. This requires improving macroeconomic policy frameworks, promoting economic diversification, and strengthening financial sectors.

“Third, countries need to raise medium-term growth to create jobs for the expanding labor force. Implementing structural reforms to boost investment and competitiveness, including by comprehensively tackling tariff and nontariff barriers in the context of AfCFTA should be a priority for the region. Countries should also take steps to ensure that the gains from these reforms are shared equally, including by implementing more progressive fiscal policies, increasing access to high quality education and health services, and promoting financial inclusion.”