Sub-Saharan Africa Builds Momentum in Multi-speed World

Continued robust growth in sub-Saharan Africa conditional on policy choices

Region’s economic performance still subject to downside risks

Rebuilding policy buffers while meeting developmental needs is priority

The near-term outlook for the region is broadly positive because most factors lending support to economic activity in the last few years remain in place—namely strong investment, favorable commodity prices, and generally prudent macroeconomic management.

The IMF’s Regional Economic Outlook for sub-Saharan Africa projects regional economic growth of 5 ½ percent in 2013–2014, compared with 5 percent in 2012. Investment is expected to remain a key driver of growth, while measured activity in 2013 will also be boosted by one-off factors in some countries, including rebound effects from floods in Nigeria and recovery of agriculture in regions previously affected by drought.

Upper middle–income countries are expected to continue grappling with sluggish growth, while activity should gradually normalize in some fragile economies that were negatively affected by political instability.

The region’s downtrend in inflation is set to extend into 2013–14. This forecast is premised on moderating nonoil commodity prices, productive local crops, and inflation-focused monetary policy. Gains made in combating inflation in eastern Africa are expected to be consolidated, while the pace of price rises is projected to slow in countries that experienced inflation flare-ups.

Strong growth, slowing inflation

Sub-Saharan Africa is now the second fastest–growing region in the world, trailing only emerging Asia (see Chart 1). However, growth patterns vary within the region. Strong economic activity in oil-exporting and low-income countries more than compensates for a significant slowdown in middle-income countries—largely reflecting problems in the euro area, but also local factors in a number of cases—and adverse effects from civil unrest in some fragile states.

After reaching more than 10 percent in 2011, consumer price inflation in sub-Saharan Africa dropped to 7.9 percent at the end of 2012 (see Chart 2). The reduction in inflation, which was particularly marked in eastern Africa, generally reflected good local harvests, well focused monetary policies and, in some cases, the appreciation of local currencies. That said, there were some exceptions to the downward trend in inflation in the region—most notably Malawi, which suffered pass-through effects...