Many countries in sub-Saharan Africa continue to grow rapidly, despite slower momentum in key developing economies like China, according to the International Monetary Fund (IMF).
The global lender trimmed its forecast yesterday for the region’s growth this year from 5.2 percent to 5 percent.
Though South Africa’s forecast remained unchanged from the downward revision to 2 percent in July, from 2.8 percent earlier, the country is one of the slowest growers in the region. The IMF attributed this in large part “to tense industrial relations, anaemic private investment, and weaker consumption growth, the latter affected by slowing disposable income growth and weakening consumer confidence”.
And it warned the country was vulnerable to sudden stops in capital inflows “which could be triggered by global re-pricing of risk or domestic shocks, especially escalating industrial tensions”.
South Africa’s growth forecast for next year is a more upbeat 2.9 percent “as global growth improves and infrastructure bottlenecks are alleviated”. However, the IMF said: “The tighter financing environment, still weak investor and consumer confidence, continued tense industrial relations, policy uncertainty and elevated household debt will weigh on economic performance.”
Heading the sub-Saharan growth tables are Ivory Coast, with a forecast of 8 percent; Ghana, 7.9 percent; and Mozambique and Ethiopia both 7 percent. Middle-income countries, which include South Africa, lagged at 3.3 percent partly due to a higher base.
The main threats to the region’s outlook are a global economic downturn or a further deceleration of growth in China or other major emerging markets that could weaken exports through lower commodity prices or reduced inflows of aid and foreign direct investment, the IMF noted.
“A sharp or protracted decline in oil and commodity prices would affect commodity exporters that do not yet have sufficient fiscal buffers (Angola, Nigeria) and could affect planned or ongoing resource development projects (Ghana, Guinea, Liberia).”
The IMF warned some frontier markets, such as Ghana and Nigeria, could be vulnerable to slowdowns of private financial flows. “Domestic risk from further social and political unrest (for example, in the Sahel and Central African Republic) and further security problems in northern Nigeria might also adversely affect neighbouring countries.”
Explaining the global backdrop the IMF said: “Markets are increasingly convinced that US monetary policy is reaching a turning point, and this has led to an unexpectedly large increase in long-term yields in the US and many other economies. This change could pose risks for emerging market economies, where activity is slowing and asset quality weakening.”
And it called for “careful policy implementation and clear communication on the part of the US Federal Reserve”.
It noted also slower growth in China “which will affect many other economies, notably the commodity exporters among the emerging market and developing economies.
At the same time, old problems – a fragmented financial system in the euro zone and worrisomely high public debt in all major advanced economies – “remain unresolved and could trigger new crises”.