NAIROBI (Reuters) - The International Monetary Fund said it was still positive about the growth outlook for Sub-Saharan Africa as economies expand output in areas like mining but warned that the global economic turmoil posed potentially significant risks.
Regional economies are expected to post nearly 6 percent average economic growth in 2012, rising from just above 5 percent on average this year, the IMF said, pointing to a better outlook than in advanced economies, which are more likely to experience a sharp slowdown due to global volatility.
“Those projections may turn out to be too optimistic given the risks to the global economy. Those projections are based on a 4 percent growth rate for the global economy in 2011 and 2012,” Antoinette Sayeh, director of the IMF’s African department, told Reuters on Wednesday after presenting the regional economic outlook.
“Those could be less if action is not taken rapidly to deal with the problems we are seeing in Europe and in the rest of the advanced economies.”
A sharp slowdown in the West could cut demand for African exports and services as well as curb private finance flows.
“A significant slowdown in advanced economies will certainly impact Africa’s growth, remittances that are sent from those countries to Africa, to FDI and to aid. There is now way we see Africa decoupled from what happens in the advanced countries,” Sayeh said.
“Countries will then need to adapt their policies to a potential drastic slowdown in advanced countries.”
Although African nations fared well in the last global crisis of 2008, thanks mainly to fiscal capacity that allowed governments to roll out stimulus measures, the IMF said there was a need to ramp up their protective measures in case of another crisis.
Actions required range from unwinding of the stimulus measures put in place in economies that have since attained a firmer footing in sustainable economic growth like Mauritius, to the saving of funds from oil exports among producers like Nigeria.
“Our advice to them is to replenish their buffers and save some of the gains they are getting from reasonably good prices for fuel to be able to have that arsenal at their disposal in the future,” Sayeh said.
She said that currency depreciation, which has been seen across many parts of the region including Kenya, was not a big concern because it was not confined to Africa, but added that officials needed to fight inflation.
“We are concerned there are second-round effects and non-food prices are rising and have risen pretty significantly. We are concerned that inflationary pressures are taking hold in a number of east African countries and that needs to be dealt with urgently,” she said.
Sub-Saharan Africa needs to continue to invest in growth and employment, which are critical for sustained poverty reduction, Sayeh added.
“Certainly in 2012, this growth of almost 6 percent, some of it comes from one-term events taking place in a number of countries. Cote D’Ivoire for example, emerging from the huge crisis that we witnessed ... it will grow at a more robust pace.”
Sayeh said some African countries had to address factors, such as employment for young people, which were part of the driving forces behind uprising in some north African countries.
“Some of what we have seen in north Africa and other countries has transpired because of lack of progress in creating jobs for young people and that is certainly a factor also in some African countries and that is something that needs to be addressed urgently.”
Despite the challenges posed by lack of all-inclusive growth, Africa was not likely to break its recent cycle of good growth, Sayeh added.
“We are still quite positive that Africa can sustain its growth that it’s seen in the last decade or more but they are urgent actions that individual governments need to take to be able to make sure that are on the same path but Africa’s prospects are still very positive,” she said.