The International Monetary Fund (IMF) Regional Economic Outlook projected that growth in sub-Saharan African economies will remain on average above five per cent in 2011.
The growth rate is expected to increase in 2012 to nearly six per cent, because of one-off boosts to production in a number of countries, it said, adding that beneath the good overall trends for sub-Saharan African, however, there is considerable diversity.
"Growth has remained strong in the region in recent years, and most low-income countries in Africa weathered the global economic slowdown well," according to the IMF that has released the report on Wednesday.
Most low income countries (LICs) have been doing very well. One third of LICs are expected to grow by more than six per cent in 2011 but poor households have been hit hard by rising food and fuel prices, and famine is devastating the Horn of Africa, it added.Some middle income countries were severely affected by the global crisis and in South Africa, with unemployment stubbornly high, growth will be limited to at most 3.5 per cent this year, the report added.
Oil exporters have enjoyed the fruits of elevated oil prices, and the non-oil sectors in their economies are projected to grow by 7.5 per cent. "But there are significant downside risks to this outlook," it has warned, adding that global financial volatility and a sharp slowdown in growth in advanced countries would affect sub-Saharan Africa by subduing export demand and private financing flows, restricting growth particularly in the region’s more integrated economies.
Volatility in commodity markets could cause further disruptions in macroeconomic balances, with both winners and losers within the region.
“There are also risks from within the region like inflation rates that have begun to rise again, driven in the first instance by rising food and fuel prices. Consumer prices rose on average by 10 per cent in the year to June 2011, up from 7.5 per cent a year earlier and some countries have seen much sharper increases in inflation, extending beyond the immediate impact of higher food and fuel prices.
Policies need to tread a fine line between addressing the challenges posed by strong growth and preparing to ward off the potentially adverse effects of another global downturn. At the same time, Sub-Saharan Africa needs to continue to invest in growth and employment, which are critical for sustained poverty reduction.
"New evidence from household surveys shows that the average living standards of relatively poor households in some fast-growing economies rose strongly in the early 2000s," according to the report. "Comparing across countries, the poorest 25 per cent of households fared best in countries where economic growth was higher. This evidence sheds some light on an apparent enigma in aggregate data showing — at best — a very weak relationship between poverty and growth. It suggests that one important link in the chain between economic growth and poverty reduction is growth in agricultural employment. Cross-country differences in agricultural employment growth explain a large part of observed differences in the relative consumption growth of the poorest households among the countries sampled.
"Similarly, a fast-paced reorientation in sub-Saharan Africa toward new markets is under way, with nontraditional partners now accounting for about 50 per cent of the region’s exports and almost 60 per cent of its imports, it said, adding that the region’s exports are but still heavily concentrated in oil, gas, and minerals, particularly in the case of its largest emerging partners — China, India, and Brazil — many emerging markets purchase a wider range of products.
The FDI into the region is also diversified, including infrastructure, agriculture, and telecommunications. The reorientation brings the usual benefits of greater international trade, but should also boost long-term growth by reducing volatility in exports and output.
The emergence of new partners provides the region with both significant opportunities — lower cost of inputs and consumption goods, transfer of technology, and economies of scale — and challenges — managing high concentration of exports on commodities and rapid sectoral changes.