Policy uncertainty in Nigeria and South Africa is hindering a rebound in growth in the sub-Saharan Africa region.
According to the International Monetary Fund (IMF) report on sub-Saharan Africa released on Monday, growth is expected to only reach 2.6% in 2017.
Growth is expected to reach 3.4% in 2018. “But ongoing policy uncertainty in Nigeria and South Africa hinders a stronger rebound, and growth is not expected to increase further in 2019,” the IMF warned.
Excluding the two economies, the average growth rate in the region is expected to be 4.4% in 2017, and could rise to 5.1% between 2018 and 2019. This shows that the key downside risk to the region’s growth stems from the larger economies, where “elevated political uncertainty” could delay needed policy adjustments and dampen investor and consumer confidence, The IMF said.
Conditions for the uptick include a recovery in oil production in Nigeria, easing drought conditions in eastern and southern Africa and an improved external environment, the report read. “Even with this uptick, growth will barely surpass the rate of population growth,” the IMF said.
Risks to growth
Although globally growth is strengthening, providing positive tailwinds to sub-Saharan Africa, low commodity prices are weighing down growth prospects of commodity exporters.
Further, public debt as a percentage of GDP has increased since 2013 and in almost half of the region’s economies, is above 50% to GDP.
“The number of low-income countries in debt distress or facing high risk of debt distress increased from seven in 2013 to 12 in 2016, and all of the region’s frontier markets or other countries with credit ratings, except Namibia, have been downgraded below investment grade,” the IMF explained.
Widening fiscal deficits, slow growth, a slump in commodity prices and depreciation of exchange rate in some countries are among the factors driving debt levels.
The IMF explained that delays in implementing policy adjustments could “reduce fiscal space” for pro-growth expenditure and crowd out private investment.