Sub-Saharan Africa Maintains Growth in an Uncertain World

Sub-Saharan African growth set to stay above 5 percent if global recovery holds

Higher global food prices present some risks to otherwise benign inflation outlook

Many countries can offset new downturn, but some might need external assistance

The IMF’s October 2012 Regional Economic Outlook for Sub-Saharan Africa finds that economic activity in the region has continued generally robust amid the hesitant global recovery. Regional output is projected to expand by about 5¼ percent in 2012 and 2013, a similar pace to that observed in 2010–11.

“We expect growth in sub-Saharan Africa to remain quite robust,” IMF African Department Director Antoinette Sayeh told reporters at a news conference in Tokyo during the 2012 IMF–World Bank Annual Meetings. But she added that the regional outlook was subject to serious risk from adverse developments in the global economy. “Downside risks are greater than they were before, and policymakers need to be even more alert,” Sayeh stated.

A new global slowdown would impair expansion in the region but, absent a wider financial crash of the type triggered by the collapse of the U.S. investment bank Lehman Brothers in 2008, a downturn would not derail growth. Depending on the characteristics of the slowdown, some individual countries might experience more severe disruptions because of specific exposures to certain export markets, commodity prices, or sources of remittances and foreign investment.

Favorable growth performance

Economic activity has held up well in sub-Saharan Africa, supported by generally prudent policies and improved fundamentals in most countries (see table). Domestic demand has provided impetus, helped by public and private investment.

Across the region, economic performance has varied. Most low-income countries have been enjoying a solid expansion, and in some cases new resource projects under way are providing an extra fillip, as with oil in Niger and iron ore in Sierra Leone.

But growth has softened in middle-income countries that more closely track the global economy. For instance, in South Africa exports have slowed and business confidence has fallen, notwithstanding supportive macroeconomic policies. At the same time, political instability has disrupted activity in a few countries, particularly Guinea-Bissau and Mali,

The near-term outlook is still broadly positive, with aggregate output growth in sub-Saharan Africa projected to remain above 5 percent in 2012 and 2013, provided...