GDP growth in Sub-Saharan Africa to reach 5.5 pct in 2014: IMF
25 April 2014, 08:16
Nairobi - International Monetary Fund (IMF) on Thursday forecast GDP growth in Sub Saharan Africa to accelerate to 5.5 percent in 2014, up from 4.9 percent last year.
Visiting IMF Africa Department Director Antoinette Sayeh told journalists in Nairobi that the growth will be underpinned by high levels of investments in the infrastructure and mining sectors, and reflects improved prospects in most oil exporters, and in several low-income countries and fragile states.
"The outlook is however, subject to more downside risks compared to previous years," Sayeh said during the launch of the semi-annual IMF Regional Economic Outlook for Sub Saharan Africa in Nairobi.
"International commodity prices are facing downward pressure as a result of a slowdown of large emerging markets," she said. A significant share of Sub Saharan Africa's trade is taking place with these countries.
In addition, Sayeh noted, that the tightening of financial conditions in China is likely to reduce the appetite of Chinese companies' investments abroad.
The strong economic performance of 2013 was mainly driven by domestic demand, while external demand provided a modest contribution to growth in the region, as world economic activity and commodity prices remained relatively subdued during most of the year.
The reversal of unconventional monetary policies in advanced economies also poses a risk to the region.
"This could result in lower global liquidity and less capital inflows to emerging and frontier market economies in Sub Saharan," she said.
"In fact, higher borrowing prices contributed to the postponement of the issuance of several sovereign bonds totaling approximately four billion U.S. dollars that were planned in 2013, " Sayeh said.
According to the IMF, several homegrown risks caused by political instability remain in the region. "In order to address these challenges, governments should implement policies that strengthen economic environments," she said.
Institute of Economic Affairs (IEA) Chief Executive Officer Kwame Owino said that Africa's growth path has not followed the conventional path.
"While Asia's growth involved the transfer of labor from the agricultural to the manufacturing sector, Africa's economic expansion has occurred even as its manufacturing industry has remained," he said.
Owino noted that economic growth is not an end to itself but an agent of poverty reduction.
Kenya Association of Manufacturers Association CEO Betty Maina said that Kenya's economic growth has not benefited all sectors of the economy.
"We therefore require specific interventions that will make local manufacturers globally competitive," she said.
Central Bank of Kenya Deputy Governor Haron Sirima said that Africa needs to strengthen its financial oversight systems as the region is becoming more interconnected to the global financial economy.
IMF Africa Department Deputy Director Abebe Selassie said that Sub Saharan Africa should take advantage of its growth momentum to reduce its fiscal deficits.
Data from the IMF indicates that the average fiscal balance for region is approximately four percent of its GDP.
Selassie said that household enterprises in the service and agricultural sectors will continue to be the main source of jobs for Sub Saharan Africa over the next few years.
"Government policies should therefore focus on removing obstacles so that the resulting productivity gains allow rural workers to seek urban employment opportunities," he said.
The IMF official added sound economic policies have made Sub Sahara one of the fastest growing regions in the world.
Africa's per capita income growth has also been accompanied by better living conditions. "There has been a general trend of improved human development indicators coupled with lower poverty rates over the past two decades," he said.
Selassie noted that financial systems deepening could be leveraged to accelerate poverty reduction.
"However, well-developed financial industries may coexist with low financial access," he said.