The last Regional Outlook of the International Monetary Fund (IMF) acknowledges that 2023 has been a difficult year in sub-Saharan African economies, particularly because ot the inflationary shock that has followed the Russia’s war in Ukraine. As a result, growth in 2023 is expected to fall for the second year in a row to 3.3 percent from 4.0 percent of 2022. Estimating the growth of the sub-Saharan Africa economy is similar to a lottery, due to the many variables that condition such a growth, like a possible slowdown in reform efforts by African countries, a rise in political instability, or external downside risks (including from China slowing down). Nonetheless, according to the IMF, this region should rebound next year of about 4.0 percent, with strong performances especially by non-resource intensive countries such as Rwanda, Cote d’Ivoire or Ethiopia, that should growth respectively of 7, 6.6 and 6.2 percent. However, here is the trick...
The report admits that this rebound is not guaranteed, also because four clouds are on the horizon which require determined policy action in the face of difficult tradeoffs:1) inflation is still too high, having reached double digits figures in 14 countries; 2) the region continues to face significant exchange rate pressures; 3) debt vulnerabilities are elevated, with half of the low-income countries in the region that are at high risk or in debt distress, a situation which is exacerbated by the fact that borrowing rates that are still high. Finally, the IMF report also points out that economic divergences within the region are widening—in particular, per capita incomes in resource intensive economies remain subdued.
Against this background, the IMF draw the attention of African policymakers on a series of policy priorities that they should pursue to address the above challenges:
The IMF report also mentions the African Continental Free Trade Area (AfCFTA) as a tool that can promote growth and foster trade integration in Africa, warning that lowering tariffs and non-tariff measures in the continent could not be enough. Additional reforms, such as improving transport, customs and border processing, as well as the access to trade financing, are all desirable reforms that have the potential to boost income levels and support the expansion of cross-border value chains.
The challenge, however, is the implementation of the Agreement. Priority should be given to ensuring that these deadlines are met, the report argues.
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