IMF’s latest Regional Economic Outlook for Sub-Saharan Africa paints a bleak picture for the region’s growth in 2016. Indeed, according to the Washington-based body, income per head in sub-Saharan Africa will fall this year for the first time. The fund has downgraded its forecast for gross domestic product growth on the continent from the 3 per cent it foresaw in April to just 1.6 per cent, well below expectations of population growth of 2.5 per cent.
This is based on the fact that growth in almost half of the 48 countries in Sub-Saharan Africa has declined, which includes the region’s oil exporters Angola, most Central African Economic and Monetary Community (CEMAC), Nigeria and several non-energy-resource exporters, such as Ghana, South Africa and Zambia as well as Liberia and Sierra Leone, which had been severely impacted by the Ebola epidemic and are now suffering from lower commodity prices. Concerning Nigeria, Africa’s most populous nation has been roiled by weak oil prices, attacks on oil installations in the south of the country and the predations of Boko Haram extremists in the north, as well as the self-inflicted pain of an abortive attempt to prop up the naira that led to a severe foreign currency shortage.
This is extremely bad news, above all considering the fact that many people didn’t really pay attention to it. That situation is extremely preoccupying in terms of poverty alleviation: Africa needed to be growing at around 6 to 7 per cent in order to make significant advances in social and economic development fields. Now we can predict that the region will regress for two to three years, which will delay the achievement of some of the development goals that have been set.
Nevertheless, I would like to emphasize the fact that IMF’s glum regional forecast is mainly driven by the problems of the largest economies, rather than being symptomatic of each Sub-Saharan country. East Africa has been knowing many successes for several years such as in Kenya or Ethiopia. In West Africa, Côte d’Ivoire and Senegal are countries where strong investment and private consumption should generate growth in the next few months (8 per cent for Côte d’Ivoire in 2016). But indeed it’s right not to forget Africa as a whole: from a continental point of view, the only two paths back to global growth would probably be a return to elevated commodity prices or widespread economic reform. When the first is pretty unlikely, we need to work on the second.
Indeed, providing strong legal and institutional frameworks and corporate governance in Sub-Saharan African economies is critical for creating an environment in which the financial sector can develop and thrive. Higher financial development can reduce the volatility of growth, if and only if it goes with improving the regulatory framework and strengthening global best practices. Among many other reforms, the harmonisation of regulations and supervisory procedures to avoid regulatory arbitrage and establishing an appropriate mechanism for resolving nonviable financial institutions should be of high priorities. Now we must do everything in our power so that all the stakeholders may find the courage to implement these structural reforms.
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