IMF sees significant cut in sub-Saharan Africa growth over virus
INTERNATIONAL - The International Monetary Fund will slash its projection for economic growth for one of the world’s fastest expanding regions due to the rapid spread of the coronavirus.
A “very significant downward revision” of sub-Saharan Africa’s growth forecast is inevitable as the pandemic curbs global expansion and containment measures hit domestic output, the lender’s Africa department Director Abebe Aemro Selassie said in a phone interview. The adjustments are expected in the coming weeks, he said.
The IMF projected in January that sub-Saharan African gross domestic product will expand 3.5% this year, but since then it lowered its forecast for Nigeria to 2% from 2.5%. While the lender hasn’t adjusted its estimate for South Africa, the country’s central said last week the economy will contract this year. The two countries account for half of the region’s GDP.
Sub-Saharan Africa makes up only 5% of the world’s economy, but has 14% of its population, raising fears of a humanitarian crisis in the continent with scarce means even before the new virus.
Selassie said he hopes governments, including China, will abide to calls from the IMF and World Bank to suspend bilateral debt payments from the poorest countries in the world. The IMF has already started to provide debt relief to some African countries to allow them to spend more on healthcare.
Twenty countries in the region have already requested either an increase in their existing programs or assistance. Nigeria and South Africa have not requested help from the IMF, Selassie said.
On calls from some African finance ministers that relief should be extended to commercial obligations Selassie said a country by country treatment “is a better approach to deal with countries debt burdens.”
“One saving grace for the region is that very few countries rely solely on Eurobonds or capital markets for financing needs,” he said.
The rapid intake of cheap commercial paper by African countries over the last decade has raised worries among African central bankers and the IMF about the region’s debt sustainability.
Selassie said countries could benefit from more flexible exchange rates to better absorb the external shock that is hurting revenues. The Nigerian central bank’s decision to allow the naira to depreciate last week amid growing pressure was the right response, he said.