Sub-Saharan Africa’s recovery from the crisis-induced slowdown is well under way, with growth in most countries now back fairly close to the high levels of the mid-2000s, according to Regional Economic Outlook: Sub-Saharan Africa relaesed by International Monetary Fund (IMF) on Tuesday.
"Growth this year is expected to average 5.5 per cent, and six percent in 2012," director of the IMF's African Department Antoinette Monsio Sayeh said commenting on the report that expected some variation among country groupings.
The recovery is near complete in most of the region’s 29 low-income countries and seven oil exporters. But growth is recovering more gradually in the region’s middle-income countries, including South Africa.
This overall sanguine picture must be judged alongside still lingering dislocations from the global financial crisis. The region’s progress toward the poverty reduction Millennium Development Goals (MDGs) has been delayed by rising unemployment and the impact of the 2008 spike in food and fuel prices.
The recent renewed increases in food and fuel prices have imposed further hardships on the region’s poorest households. Looking ahead, the global price shocks -- and the region’s fast recovery -- are also likely to lead to higher inflation and, in a number of fuel importers, to deteriorating current account deficits.
With strong growth and rising inflation pressures, the broad direction of fiscal policy in most countries should be moving away from the supportive stance of the last few years. Nevertheless, fiscal support to poor households hit by rising food prices will need to be accommodated in some countries. This should be targeted on their incomes or primary spending.
Monetary policy remains looser than desirable in many low income countries in the region, even before the recent surge in food and fuel prices. To counter incipient inflationary pressures, monetary policy will need to be tightened, particularly where growth has already regained pre-crisis levels.
Private capital inflows to the region are back to the rising trajectories of the early to mid-2000s, although only a few of sub-Saharan Africa’s frontier markets have yet shared in the global resurgence in portfolio flows; and in the fast-growing East African Community, further adaptations in both macroeconomic and structural policies are required to sustain and enhance the region’s recent strong economic performance, according to Sayeh, who drew attention to the main messages of the two analytical chapters in the Regional Economic Outlook.