IMF sees slight dip in ‘robust’ African growth
A slip in commodity prices and foreign investment is likely to trim otherwise stellar growth in sub-Saharan Africa this year, the International Monetary Fund said Tuesday.
The Washington-based lender cut forecasts for regional growth to 5.0 percent for 2013, down half a percentage point from its own April forecasts.
“Spillovers from sluggish external demand, reversal of capital flows, and declines in commodity prices are contributing to somewhat weaker growth prospects in many countries,” the IMF said.
Still “growth in sub-Saharan Africa remained robust” and the growth forecast for 2014 was even revised up by a tenth of a point to 6.0 percent.
But this year’s downward revision will serve as a warning to many.
In the past few years sub-Saharan Africa has been among the fastest growing regions in the world.
An increase in domestic demand has led many to believe that the region is on track for sustained growth, the likes of which raised many Asian nations out of poverty.
But Tuesday’s report shows sub-Saharan Africa remains vulnerable to external shocks.
The prospect of tighter US monetary policy has caused investors to pull cash back from Africa.
Capital flows to emerging markets more broadly are projected to drop by more than 10 percent this year, or by $153 billion, according to the International Institute of Finance — a lobby group for big banks.
And despite the emergence of African consumers as a major force for growth, output in many countries remains closely tethered to commodity prices.
According to consultancy firm McKinsey, energy, metal and agricultural prices have more than doubled since 2000, already reversing a sharp decline seen during the 2008 financial crisis.
In many African countries that has helped boost growth and filled state coffers.
But the IMF said a dip in commodity prices will have a major impact on some of the fastest growing countries like Nigeria, Ethiopia, Angola, Ghana and Liberia.
Any price drop would slow the flow of cash to government accounts, making it difficult to pay for growth-promoting infrastructure and development projects.
In its report the IMF also repeated its recent concerns about the state of Africa’s largest economy — South Africa.
The IMF warned last week that South Africa is trailing other emerging markets economies and must quickly implement reforms if it wants to avoid crisis.
“The economy has underperformed other emerging markets and commodity exporters, exacerbating South Africa’s already high levels of unemployment and inequality and contributing to rising social tensions,” it said then.
South Africa is expected to grow at a modest 2.0 percent this year, not enough to bring down unemployment, which remains above 25 percent.