Roger Nord, Deputy Director for Africa at the IMF recently attended a parliamentary high-level roundtable arranged by the Africa APPG and chaired by Lord Steel, the APPG's President.
Mr Nord presented the recently released Regional Economic Outlook on Sub-Saharan Africa and said that despite figures showing the African GDP as a whole is growing at about 5 percent in 2014 and 5¾ percent in 2015, warned that the Ebola outbreak could have far longer term economic effects for the entire region long after the virus has been defeated. He described the economic impact as potentially ‘devastating’ with trade, transport and tourism reduced, and investment confidence severely affected. The key sectors of mining, agriculture and services have been severely disrupted which has huge negative economic and social impacts.
He reported that if it takes up to 9 months to get the outbreak under control it is expected to reduce growth in Guinea, Liberia and Sierra Leone considerably and that neighbouring countries such as Senegal and The Gambia have seen their tourism activities substantially curtailed. He warned that if it is not brought under control rapidly, it could have larger regional spillovers than currently anticipated, and that a confidence shock could have severe consequences for activity in sub-Saharan Africa more widely.
More generally, he argued that the figures from the sample of countries showed that growth was largely not attributable to the extractives sector but to more private sector lending, investment in infrastructure and broader tax bases. He did however comment that public debt to GDP ratios were rising more rapidly in market access economics compared to the rest of the region.
Mr Nord added that good domestic polices and political and structural reform have also contributed to continued growth but that domestic policies has held back growth in South Africa due to electricity bottlenecks, difficult and sometimes violent labour relations and poor treatment of workers, and the consequent lack of business confidence.
Other macroeconomic challenges include the reduction in oil and commodity prices having a negative impact in oil exporter countries which are seeing an ongoing reduction in their GDP. However, oil importer countries are now able to take advantage of the cheaper oil. Infrastructure and especially electricity is essential for investment and there has been little progress on electricity output for the region since 1975.
Finally, he acknowledged that inclusive growth was one of the key challenges currently faced and that growth and increase in GDP does not equate to a reduction in poverty. Africa’s increasingly youth demographic also poses both challenges. More jobs and opportunities for young people will need to be created, especially in a climate where radical armed groups are providing other forms of livelihoods to disenchanted young people.
Regarding the IMFs relationship with Africa and concerns over debt from IMF loans. Mr Nord explained that at the end of 2013 the total stock of IMF lending to Sub-Saharan Africa stood at US $7.3 billion but has decreased vastly since the lending peak of 2009 and continues to fall. He said the the IMF’s general policy advice to all SSA countries is one that encourages regional integration, good natural resource management and stability in the financial sectors- designed primarily to encourage a pro-business environment.
The slides from the full presentation are available here.