IMF: African growth falls to lowest level in 15 years
New data says Sub-Saharan region feeling effects of drought, commodity price shocks.
Halima Athumani - KAMPALA, Uganda (AA) - Sub-Saharan Africa is set to experience a second difficult year in its economic growth.
According to the International Monetary Fund (IMF)’s April 2016 regional outlook report, economic activity has weakened markedly, with growth for the region as whole falling 3.5 percent in 2015 -- the lowest in 15 years.
In the report, Antoinette Sayeh, director of the IMF's African Department, says: "A large number of countries have been hit by considerable commodity price shocks, they have now lost revenue yet they have to keep paying civil servants or keep the minimum in expenditure."
Adding that since such countries are already facing difficulties in employing citizens "many are expanding their financing and they can’t do that without getting into unsustainable debt".
The IMF indicates that the slowdown reflects the "adverse impact of the commodity price slump in some of the larger economies and more recently the drought in eastern and southern Africa".
Oil exporters such as Angola and Nigeria continue to face difficult economic conditions and their growth shows a further slump to two percent this year from six percent in 2014.
Oil prices before mid-2014 were at a high of $110 per barrel. However, prices tumbled with crude oil now costing below $50, hitting many African exporting countries but favorable to oil importers.
Sayeh said that the sharp decline in commodity prices put many of the largest Sub-Saharan African countries under severe strain: “As a result, oil exporters such as Nigeria and Angola but also most countries of the Central African Economic and Monetary Union continue to face particularly difficult economic conditions.”
In the report entitled ‘Time for a Policy Reset’ the IMF calls on African countries to remain vigilant to any signs of financial stress and set up early warning signs and for respective central banks to limit the use of advances to the government to mitigate short-term financing constraints among others.
On the other hand, non-energy commodity exporters such as Ghana, South Africa and Zambia have also been hurt by the decline in commodity prices. Countries such as Guinea, Liberia and Sierra Leone will also have slow growth as they gradually recover from the Ebola epidemic.
Several southern and eastern African countries -- including Ethiopia, Malawi and Zimbabwe -- are suffering from drought which has hit agricultural output and in some cases affected hydroelectric power generation.
The World Food Program and USAID predict that about 40-50 million people are at risk of inadequate food supply by the end of 2016, including 2.5 million already identified to be in an acute food crisis.
The IMF report notes: "If the abnormally hot and dry conditions persist, a regional food security crisis, including a substantial increase in the size of the extremely vulnerable population, could emerge in 2016 and early 2017."
However, despite gloomy economic growth, the IMF stresses that the outlook remains favorable as many countries in the region continue to register robust growth. Most oil importers are generally faring better with growth in excess of five percent, such as Cote d’Ivoire, Kenya and Senegal.