Navigating global uncertainty


The International Monetary Fund expects growth in sub-Saharan Africa to increase from 3% in 2018 to 3.5% this year, as the region continues a fragile recovery from the commodities slump.

The average is weighed down by poor performance in large, resource intensive economies including the continent’s two biggest, Nigeria (2.1%) and South Africa (1.2%). More diversified economies are expected to drive growth, with 21 countries expected to grow at 5% or more.

It’s a mixed picture, but both sets of countries face the task of navigating an increasingly uncertain global context.

In April the IMF cut its global outlook from 3.5% - 3.3%, the lowest since 2009, amid a worsening outlook in advanced economies and the impact of the US - China trade war.

The latter has contributed to slower global demand, particularly from China, in turn leading to lower commodity prices and weaker demand for sub-Saharan commodity exports.

At the time, the IMF warned that this confluence of factors, combined with an intensification of trade tensions, could shave up to 2% off growth in sub-Saharan Africa this year. This was before Donald Trump raised tariffs on $200bn worth of Chinese goods in May.

The dimming global outlook is putting more pressure on the region’s economies, which are facing mounting debt and shrinking fiscal space for development spending.

To weather the storm the IMF urges governments to focus domestic revenue mobilization - which remains weak across sub-Saharan Africa - and regional trade integration.

On the latter there are hopes for the impending implementation of the African Continental Free Trade Area (AfCFTA), having secured the minimum 22 ratifications needed to come into force.

The good news is that investment flows to the continent have remained resilient despite growing global uncertainty. While total FDI of $40bn in 2018 remains well off levels seen prior to the commodities slump, this was up 6% from the previous year.

Assuming Africa can make meaningful progress on implementing the AfCFTA, and the global context doesn’t substantively deteriorate further, this gives some cause for cautious optimism.

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