Sub-Saharan Africa's Recovery Maintains Momentum

Most sub-Saharan African countries have regained pre-crisis growth rates

Domestic demand, growing ties with Asia set to sustain strong performance

But rising world food prices may hit budgets of urban poor

Low income countries, which escaped the worst impacts of the global crisis, are expected to match pre-crisis growth rates of about 6½ percent in 2011. But the recovery in South Africa has been more subdued, restricting projected growth to about 3½ percent in 2011.

Domestic demand in most countries is being supported by automatic stabilizers, expansion in public investment and social support programs, and continued monetary accommodation. Growing trade ties with Asia are also playing a role in the region’s recovery, primarily through commodity markets.

One major concern raised in the World Economic Outlook Update is that rising global fuel and food prices may have a significant impact on Africa in 2011. While the effects of recent increases in world food prices have so far been small in Africa, because of good local harvests, the urban poor remain very vulnerable to rising food prices because of the high share of food in their consumption baskets. This may increase pressure for additional support from government budgets.

Managing such spending pressures, particularly against the backdrop of elevated fiscal deficits and narrowing output gaps, will be an important challenge for the region in 2011—a year with a busy political calendar, including perhaps 17 national elections.

Resilience and recovery

Prior to the recent global crisis, sub-Saharan Africa enjoyed a period of strong growth. Growth in the region’s 29 low-income countries was particularly impressive at more than 6 percent during 2004–08, second only to developing Asia. This reflected the improved political environment, favorable external conditions, and sound macroeconomic management.

These strong initial conditions helped most countries in the region weather the worst effects of the food and fuel price hikes of 2007–08 and the subsequent global financial crisis. Many countries supported output by injecting fiscal stimulus and lowering interest rates. As a result, low-income countries in the region continued to grow at nearly 5 percent in 2009 (see chart).

In several of the region’s middle-income countries, however, including South Africa, output...