Resilient Growth in Sub-Saharan Africa, Despite Strong Headwinds

Growth still robust but at lower end of range by recent standards

Sharp decline in oil prices poses formidable challenges for oil exporters

Achieving sustained, high, inclusive growth the overarching priority

The IMF’s latest Regional Economic Outlook for sub-Saharan Africa projects that the economy of the region is set to register another year of solid performance , expanding at 4½ percent in 2015. While this rate will be at the lower end of the range experienced over the last few years, sub-Saharan Africa will remain among the fastest growing regions of the world.

The deceleration in growth reflects the adverse impact of the sharp decline in the prices of oil and other commodities (see Chart 1). However, this impact will be highly differentiated across the region (see Chart 2).

On the one hand, growth among oil importers will remain strong, notably in low-income countries, driven by investment in mining and infrastructure and by strong private consumption. Excluding South Africa—where growth is expected to remain lackluster, held back by continuous problems in the electricity sector—and Guinea, Liberia, and Sierra Leone—where the Ebola outbreak continues to exact a heavy economic and social toll—growth among oil importers is still expected to reach close to 6 percent in 2015 and 6½ percent in 2016.

On the other hand, the eight oil-exporting countries in the region, hard hit and with limited savings to fall back on, are expected to undertake significant fiscal adjustment, with adverse implications for growth. Growth among these countries is now expected at 4 ½ percent in 2015, some 2½ percentage points lower than what had been expected six months ago.

Fiscal deficits are set to remain high or worsen in several countries. Among oil exporters, fiscal adjustment efforts will offset only partially the impact of lower oil prices, while in some other countries fiscal deficits are expected to remain close to the elevated levels of 2014. In the countries hit by Ebola, worsening fiscal positions reflect the efforts to combat the disease.

Downside risks

In that context, the outlook is subject to various downside risks. Countries depending on external financing to cover large deficits are vulnerable to a steep increase in their financing costs that could be triggered, for instance, by the normalization of monetary policy in the United States.

Further weaknesses in Europe and Japan and an abrupt slowdown of growth in China could also lower the...