Africa: Opening Remarks at the Regional Economic Outlook Press Conference
The introduction by Abebe Aemro SelassieDirector of the IMF’s African Department, at the launch of the Fund’s African Regional Economic Outlook for October 2022:
Good morning! Let me start by thanking you all for being with us today for the release of the October Regional Economic Outlook for Sub-Saharan Africa.
Just six months ago, as we tackled the Russian invasion of Ukraine, we warned of uncertain times ahead, with risks very much on the downside. Unfortunately, many of these risks have materialized.
Global inflation turned out to be higher and more persistent than expected, leading to a compression in the cost of living for most households and a general tightening of monetary policies around the world. In addition, global prices for major commodities are increasingly volatile as the lingering impact of the COVID-19 pandemic continues to weigh on economic activity.
In this context, and before answering your questions, I would like to build on our latest review and take a moment to…
… reflect on how the global downturn is affecting sub-Saharan Africa
As we mentioned in April, the region showed welcome signs of recovery towards the end of 2021 as the worst of the pandemic subsided. But this recovery was interrupted.
We expect growth to slow sharply this year 4.7% in 2021 to 3.6%– as a global slowdown, tighter global financial conditions and commodity price volatility spill over into a region already weary of a prolonged pandemic. Looking ahead, growth is expected to remain subdued next year, averaging just 3.7% in 2023.
Unsurprisingly, however, these prospects differ significantly from country to country.
- Oil exporters, in particular, are expected to benefit from higher oil prices and will grow 3.3% this year, compared to 3.0% last year.
- Other resource-intensive economies, on the other hand, will grow only 3.1% in 2022, down from 5.1% last year.
- Low-resource countries, which benefit from a more diversified economic structure, will continue to be among the most dynamic economies in the region. But in line with a deterioration in their terms of trade, they will only grow by 4.6% in 2022, compared to 6.4% last year.
Against this backdrop, and with limited options, many countries find themselves being pushed closer to the edge.
The most recent turmoil is just the latest in a series of shocks over the past few years, all of which have weighed on the region’s political space. Rising food and energy prices are hitting the most vulnerable region. Public debt has reached nearly 60% of GDP, leaving the region with debt levels last seen in the early 2000s. In fact, 19 of the region’s 35 low-income countries are currently in debt over-indebtedness or at high risk of over-indebtedness. And inflation rates are in double digits for 40% of the region’s economies.
For the authorities, this is the most difficult political environment in years. Policy makers in sub-Saharan Africa will need to deal immediately with economic and humanitarian crises as they emerge, while creating buffers and reducing as best they can vulnerability to future shocks. Furthermore, the region’s prosperity will require high-quality growth, so policies must also prepare the ground for a sustainable recovery.
With these goals in mind, the October Regional Outlook focuses on four policy priorities:
- The first priority is to fight against food insecurity— protect the most vulnerable by focusing on getting scarce resources to those who need them most.
- Next, the authorities will have to pursue the consolidation of public finances under more difficult financing conditions.. This will require: continued revenue mobilization; a closer focus on critical spending priorities; Increased efficiency; and prudent debt management within credible medium-term fiscal frameworks.
- In addition, the authorities should take steps to contain inflation, raising interest rates cautiously and gradually.without jeopardizing economic recovery or undermining longer-term credibility.
- Finally, policymakers must continue to prepare the ground for quality growth, in the context of accelerating climate change.. Investing in resilient and green infrastructure is essential, especially to take advantage of the region’s tremendous endowment of renewable energy resources.
In conclusion, I would like to stress the crucial importance of international aid.
Budget support, including official development finance and humanitarian assistance, has declined over the past two decades, while the region’s immediate and longer-term development needs have increased, particularly in areas such as food security and climate change.
More is needed. And as we look forward to the upcoming United Nations Climate Change Conference in Egypt (COP-27), it should be noted that increased support, including more concessional finance, is needed for sub-Saharan Africa can pursue a low-carbon, climate-resilient economy. growth path.
The IMF is helping to catalyze new capital flows by building local capacity on climate strategy issues while flexibly expanding its lending facilities with our Resilience and Sustainability Trust to provide affordable financing to address structural challenges in more long term, including climate change. I appreciate that we have recently reached a staff level agreement with Rwanda on a potential arrangement under this facility. Most recently, we launched a new food shock window as part of our emergency lending facilities, which will help eligible members mitigate the impact of the current emergency. We have also provided nearly $50 billion in financial support to sub-Saharan Africa since the start of the pandemic.
With help, sub-Saharan Africa will be ready to fulfill the promise of the African century, contributing to a more prosperous and greener future for the region and the world.
Thank you for your attention and I would be happy to answer your questions.