The International Monetary Fund has proposed that growth in sub-Saharan Africa will remain strong as an uneven global improvement continues, despite setback. This was enclosed in its World Economic Outlook for October. The outlook, which put global growth at 3.3 per cent in 2014 and reduced the 2015 outlook to 3.8 per cent from four per cent earlier projected in April, stressed that legacies from crisis and low potential growth weighed on recovery.
It said, growth is projected to remain strong in sub-Saharan Africa, generally in line with the April 2014 WEO projections over the 2014-15 periods, although prospects vary across countries.
It said while activity in Nigeria “has been resilient despite poor security conditions and a decline in oil production earlier this year”, in South Africa, 2014 growth “is being dragged down by industrial tensions and delays in fixing infrastructure gaps, including electricity constraints.”
According to it, the projections of the report entail a robust outlook for low-income developing countries including Ghana and most recently, Zambia, large macroeconomic imbalances had resulted in pressures on the exchange rate and inflation, with growth projected to surpass six per cent in both 2014 and 2015.
Stronger growth in advanced economies will buoy low-income developing countries’ net external demand, although the projected easing in nonfuel goods prices will induce some decline in the terms of trade for the net exporters of commodities. Domestic order is expected to remain resilient as in recent years it said.
According to it, up-and-coming markets are adjusting to rates of economic growth lower than those reached in the pre-crisis boom and the post-crisis improvement.
Overall, the speed of recovery is becoming more country specific, adding that other elements were also affecting the outlook it said.
For instance, it said although financial markets had been optimistic, with higher equity prices, compressed spreads, and very low volatility that had not translated into a pickup in investment, which – particularly in advanced economies – has remained subdued.
In addition, the outlook noticed that geopolitical tensions had risen, stressing that so far, their macroeconomic effects appeared mostly limited to the regions involved, although there were tangible risks of more extensive disruptions.
It said, “These problems show up in low potential growth in advanced economies – which may be affecting the pace of recovery today – and a decline in potential growth in emerging markets.
“With world growth in the first half of 2014 slower than expected, global growth for 2014 is projected at 3.3 per cent, 0.4 percentage point lower relative to the April 2014 World Economic Outlook.
“The growth projection for 2015 is also slightly lower at 3.8 per cent. These projections are predicated on the assumption that key drivers supporting the recovery in advanced economies – including moderating fiscal consolidation (Japan being one exception) and highly accommodative monetary policy – remain in place.”