Regional Economic Outlook for sub-Saharan Africa African Department International Monetary Fund November 30, 2017
Outline 1. Sharp slowdown after two decades of strong growth 2. A partial and tentative policy response 3. Near-term macroeconomic challenge • Addressing debt vulnerabilities • Emphasis on revenue mobilization • Fostering economic diversification 4. Medium-term prospects remain strong • Demographic dividend • Technology facilitating stronger catch-up growth 2
Since the mid‐1990s, most sub‐Saharan African countries have been registering high growth rates 8 7 6 5 4 Percent 3 2 1.4 1 0 -1 -2 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 3
Important progress in human development 120 1,200 1990 2016 100 1,000 Per 100,000 live births 80 800 Per 1,000 births 60 600 40 400 200 20 0 0 Maternal mortality Infant mortality 4 Developments in sub-Saharan Africa
Three broad factors have facilitated the strong growth Better policies and institutions High Capital Commodity Inflows Prices 5
But in 2016 growth slumped sharply and only a modest recovery is expected 8 Sub-Saharan Africa 7 Sub-Saharan Africa excluding Nigeria and South Africa Real GDP growth, percent 6 5 4 3 2 1 0 2013 2014 2015 2016 2017 proj. 2018 proj. 2019 proj. 6 Developments in sub-Saharan Africa
The recovery is not sufficient to raise per capita growth in many countries per capita growth per capita growth Negative real GDP Positive real GDP 33 57% 12 43% Number of countries Percent of population 7 Developments in sub-Saharan Africa
Oil exporting economies have been hit the most 8 6 Median real GDP growth, percent 4 2 0 -2 Oil exporters (8 countries) -4 Other resource-intensive countries (15 countries) Non-resource-intensive countries (22 countries) -6 2013 2014 2015 2016 2017 proj. 2018 proj. 2019 proj. 8 Developments in sub-Saharan Africa
Outline 1. Sharp slowdown after two decades of strong growth 2. A partial and tentative policy response 3. Near-term macroeconomic challenge • Addressing debt vulnerabilities • Emphasis on revenue mobilization • Fostering economic diversification 4. Medium-term prospects remain strong • Demographic dividend • Technology facilitating stronger catch-up growth 9
Easier financing conditions have brought frontier economies back to the market 1,100 8 Sub-Saharan African non-oil exporters Sub-Saharan African frontier market international bond Sub-Saharan African oil exporters International sovereign bond issuances, bllions of US dollars 1,000 7 900 6 800 spreads, basis points 5 700 4 600 3 500 2 400 1 300 200 0 Jan-11 Sep-12 May-14 Jan-16 Sep-17 2011 2013 2015 2017:Q2 10 Developments in sub-Saharan Africa
Exchange rate pressures have eased in many countries—the case of Nigeria 550 Interbank market Nigerian exchange rates, Naira per US dollar 500 Parallel rate Official Rate 450 400 350 300 250 200 150 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 11 Developments in sub-Saharan Africa
Fiscal deficits are stabilizing Other resource- Non-resource- Oil exporters intensive countries intensive countries 2 2 2 Interquartile range Interquartile range Interquartile range 1 1 1 Median Median Median Overall fiscal balance, percent of GDP 0 0 0 -1 -1 -1 -2 -2 -2 -3 -3 -3 -4 -4 -4 -5 -5 -5 -6 -6 -6 -7 -7 -7 -8 -8 -8 2011 2013 2015 2017 2011 2013 2015 2017 2011 2013 2015 2017 12 Developments in sub-Saharan Africa
Outline 1. Sharp slowdown after two decades of strong growth 2. A partial and tentative policy response 3. Near-term macroeconomic challenge • Addressing debt vulnerabilities • Emphasis on revenue mobilization • Fostering economic diversification 4. Medium-term prospects remain strong • Demographic dividend • Technology facilitating stronger catch-up growth 13
Debt stocks have risen throughout the region Other resource- Non-resource- Oil exporters intensive countries intensive countries 70 70 70 Interquartile range Interquartile range Median Median 60 60 60 Public debt, percent of GDP 50 50 50 40 40 40 30 30 30 Interquartile range Median 20 20 20 10 10 10 2011 2013 2015 2017 2011 2013 2015 2017 2011 2013 2015 2017 Addressing debt vulnerabilities 14 Emphasis on revenue mobilization Fostering economic diversification
Driven by large fiscal deficits and depreciation Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 15
Debt service costs have increased 30 Interquartile range Sub-Saharan Africa median Total debt service, percent of revenue 25 Oil exporters median 20 15 10 5 0 2010 2011 2012 2013 2014 2015 2016 2017 proj. 16 Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification
Fiscal consolidation plans need to be implemented Non-resource- Other resource- Oil exporters intensive countries intensive countries 100 100 100 Baseline Baseline Baseline 90 90 90 Median public debt, percent of GDP 80 80 80 70 70 70 60 60 60 50 50 50 40 40 40 30 30 30 20 20 20 10 10 10 2011 2014 2017 2020 2011 2014 2017 2020 2011 2014 2017 2020 17 Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification
Fiscal consolidation plans need to be implemented Other resource- Non-resource- Oil exporters intensive countries intensive countries 100 100 100 Baseline Baseline Baseline 90 90 90 Median public debt, percent of GDP 80 80 80 70 70 70 60 60 60 50 50 50 40 40 40 30 30 30 20 20 20 10 10 10 2011 2014 2017 2020 2011 2014 2017 2020 2011 2014 2017 2020 Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 18
Fiscal consolidation plans need to be implemented Other resource- Non-resource- Oil exporters intensive countries intensive countries 100 100 100 No adjustment No adjustment No adjustment Baseline Baseline Baseline 90 90 90 Median public debt, percent of GDP 80 80 80 70 70 70 60 60 60 50 50 50 40 40 40 30 30 30 20 20 20 10 10 10 2011 2014 2017 2020 2011 2014 2017 2020 2011 2014 2017 2020 Fostering economic diversification Addressing debt vulnerabilities Emphasis on revenue mobilization 19
Fiscal multipliers are lower in SSA Impact on GDP growth of a 1 pp increase in … Consumption-to-GDP ratio Investment-to-GDP ratio Revenue-to-GDP ratio 1.2 1.2 1.2 1.0 1.0 1.0 0.8 0.8 0.8 0.7 Real GDP growth, percent 0.6 0.6 0.6 0.5 0.4 0.4 0.4 0.2 0.2 0.2 0.0 0.0 0.0 –0.2 –0.2 –0.2 –0.2 –0.4 –0.4 –0.4 –0.6 –0.6 –0.6 0 1 2 3 4 5 0 1 2 3 4 5 0 1 2 3 4 5 Years Years Years Fostering economic diversification Addressing debt vulnerabilities Emphasis on revenue mobilization 20
Significant potential for raising tax revenues 25 Actual tax Tax potential 20 Tax ratio, percent of GDP 15 10 5 0 Oil Resource- Non-resource exporter intensive intensive countries countries 21 Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification
Diversification offers a path to growth 15 SSA oil exporters SSA other resource-intensive GDP per capita growth, 1962–2014 percent SSA non-resource-intensive Other countries GNQ 10 BWA 5 UGA 0 -5 0 1 2 3 4 5 6 7 Average export diversification, 1962–2014 (Higher values = less diversification) Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 22
Usual factors important for diversification… Access to Electricity Income Inequality (Gini) 2 2 Residual of export diversification Residual of export diversification 0 0 -2 -2 SSA Non-SSA SSA Non-SSA -4 -4 -40 -20 0 20 40 -0.1 0 0.1 0.2 Residual of Gini Residual of access to electricity, percent 23
Usual factors…. (cont) Credit to private sector Ease of doing business 2 2 Residual of export diversification Residual of export diversification 1 0 0 -1 -2 SSA -2 SSA -3 -4 -1 -0.5 0 0.5 1 1.5 -50 -25 0 25 50 75 100 Residual of credit to private sector, Residual of ease of doing business percent 24
Getting the policy mix right and playing to your strengths Botswana: Expanding along Uganda: Moving into the value chain manufacturing • Built on an existing position in the • Expanded from agro-commodities to diamond industry agro-processing • Helped to create positive spillovers • Industrial clusters supported exports to supporting sectors of light manufacturing • Strong record of good governance • Sustained macroeconomic stability • Prudent economic management • Expanding regional trade supported export growth Fostering economic diversification 25 Addressing debt vulnerabilities Emphasis on revenue mobilization
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