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© Copyright – Institute for Security Studies – 22 June 2017

HOW TO RESTART AFRICA’S GROWTH ENGINE

International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, May 2017

African Department International Monetary Fund

June 2017

Restarting the Growth EngineRegional Economic Outlook

for Sub-Saharan Africa


Outline

3

ABroad-basedSlowdown InsufficientAdjustment

IncreasingVulnerabilities RecalibratingthePolicyResponse

Adjustment

Financing


2016sawabroad-basedslowdown,withcommodityexportersbeingparticularlyhit...

Real GDP Growth, Average 2010–15

SSD GNQ CPV GIN ZAF GMB SWZ MUS SEN MWI UGA NGA ZMB TZA ZWE GHA ETH

CAF MDG GNB MLI STP COG TGO NAM NER RWA COD

COM BDI LSO CMR SLE KEN TCD MOZ

BEN AGO SYC CIV

LBR BFA

GAB

ERI

BWA

0

1

2

3

4

5

6

7

8

≤ –2 –2.0 –1.5 –1.0 –0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8 >8

Freq

uenc

y

Percent

Resource-intensive countries

Nonresource-intensive countries

Weighted average = 5.0

Median = 5.1


2016sawabroad-basedslowdown,withcommodityexportersbeingparticularlyhit...

Real GDP Growth, 2016

SSD NGA LBR SWZ ZAF ZWE MWI ZMB MOZ MUS SYC UGA TGORWA KEN TZA ETH

GNQ BDI AGO NAM GMB LSO ERI STP SLE MLI SEN CIV

COG GAB BWA MDG NER GNB

TCD COD GHA CAF GIN

COM CMR BFA

CPV

BEN

0

1

2

3

4

5

6

7

8

≤ –2 –2.0 –1.5 –1.0 –0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8 >8

Freq

uenc

y

Percent

Resource-intensive countriesNonresource-intensive countries

Weighted average = 1.4

Median = 3.7


…andinsomecases,compoundedbyrisingfoodinsecurity.

6


Inflationistickingupinmanycountriesintheregion.

7

Number of Countries with Inflation Rates Greater than 10 Percent

0

5

10

15

20

25

30

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Numb

er of

coun

tries


Outline

8



Adjustment

Financing


Fiscaldeficitshavewidenedamonghardest-hitcountriesandremainelevatedelsewhere.

Fiscal Balance, 2010–16

–6

–4

–2

0

2

4

6

8

Average 2010–13 2016 Average 2010–13 2016 Average 2010–13 2016

Oil exporters Other resource-intensive countries Nonresource-intensive countries

Perce

nt of

GDP

Overall balance (percent of GDP)


Fiscal Balance and Real GDP Growth, 2010–16

10

Fiscaldeficitshavewidenedamonghardest-hitcountriesandremainelevatedelsewhere.

–6

–4

–2

0

2

4

6

8

Average 2010–13 2016 Average 2010–13 2016 Average 2010–13 2016

Oil exporters Other resource-intensive countries Nonresource-intensive countries

Perce

nt

Real GDP growth (percent) Overall balance (percent of GDP)


Higherborrowingcostshavemaderecoursetoexternalmarketfinancinglessattractive…

Frontier and Emerging Market Spreads, 2014-17

200

300

400

500

600

700

800

900

1,000

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17

Basis

point

s

Emerging marketsSub-Saharan Africa frontier markets


...leadingtogreaterrecoursetodomesticfinancing,...

Exposure of Commercial Banks to the Government

AGO

BEN

BWA

BFA

BDI

CPV

CMRCAFTCD

COMCOD

COG

CIV

GNQ

GAB GHA

GIN

GNB

KEN

LSOLBR

MDGMWI

MLI

MUS

MOZ

NAMNER

NGA

STP

SEN

SYC

SLE

ZAF

SSD

SWZTZA

TGO

UGA

ZMB

0

5

10

15

20

25

30

35

0 5 10 15 20 25 30 35Dec.

2016

or la

test a

vaila

ble, p

ercen

t of c

omme

rcial

bank

asse

ts

Average December 2010–13, percent of commercial bank assets

Increasing Exposure

Decreasing Exposure


Exchangerateshavedepreciated,butnotsufficientlyinsomecaseswithparallelmarketsspreadsemerging…

Depreciation of National Currencies Against the U.S. Dollar since December 2013 (+ indicates depreciation)

1Unofficial estimates report the spread to be around 20 percent between cash U.S. dollars and domestic bank deposits and bond notes.

01020304050607080

AGO

NGA

GHA

SLE

ZMB

DRC

TZA

GIN

ZAF

NAM

LBR

ZWE¹

UGA

STP

RWA

KEN

MUS

ETH

BDI

Oilexporters

Other resource-intensive countries Nonresource-intensive countries

Perce

nt

Spread with parallel rate, latest availableChange in exchange rate, Dec. 2013–Mar. 2017


…andreservesaretrendinglowerfortheregion,andacutelysoinoilexporters

International Reserves, 2014–16

0

1

2

3

4

5

6

7

Oct-1

4No

v-14

Dec-1

4Ja

n-15

Feb-1

5Ma

r-15

Apr-1

5Ma

y-15

Jun-

15Ju

l-15

Aug-1

5Se

p-15

Oct-1

5No

v-15

Dec-1

5Ja

n-16

Feb-1

6Ma

r-16

Apr-1

6Ma

y-16

Jun-

16Ju

l-16

Aug-1

6Se

p-16

Oct-1

6No

v-16

Dec-1

6

Month

s of im

ports

Sub-Saharan Africa interquartile rangeOil exporters medianNonresource-intensive countries median


Outline

15



Adjustment

Financing


Debtlevelsareontheriseacrosstheregion…

16

Public Debt, 2000–16

0

20

40

60

80

100

120

140

160

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Perce

nt of

GDP

Sub-Saharan Africa interquartile rangeSub-Saharan Africa medianOil exporters median


…andpublicdebtisontherise,increasingthepressureondebtsustainability...

Public Sector Debt Accumulation, 2010–16

-10

-5

0

5

10

15

2011–13 2014–16 2011–13 2014–16 2011–13 2014–16

Oil exporters Other resource-intensive countries Nonresource-intensive

Sim

ple a

vera

ge, p

erce

ntage

point

s


…andpublicdebtisontherise,increasingthepressureondebtsustainability...

Public Sector Debt Accumulation, 2010–16

-10

-5

0

5

10

15

2011–13 2014–16 2011–13 2014–16 2011–13 2014–16


Simple

aver

age,

perce

ntage

point

s

Primary deficit Real growth and interest rate Exchange rate depreciation Other Change in debt

-10

-5

0

5

10

15

2011–13 2014–16 2011–13 2014–16 2011–13 2014–16


Simple

aver

age,

perce

ntage

point

s

Primary deficit Real growth and interest rate Exchange rate depreciation Other Change in debt


...especiallyinoil-exportingcountries.

External Debt Service-to-Exports Ratio, 2010-16

Total Debt Service-to-Revenue Ratio, 2010-16

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015 2016

Interquartile rangeSub-Saharan Africa medianOil exporters median

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015 2016

Interquartile rangeSub-Saharan Africa medianOil exporters median


Thefinancialsectorisfeelingthepinch,withassetqualitydeclining,...

Nonperforming Loans to Total Loans

0

5

10

15

20

25

30

CAF

SLE

GNQ

NER

LBR

GHA

CMR

TCD

AGO

GIN

TZA

ZAF

BWA

NGA

GAB

NAM

COG

SEN

MDG BD

ISY

CSW

ZRW

AUG

AKE

NM

US LES

MOZ

Resource-intensive countries Nonresource-intesnive

Perc

ent

2013Latest available


...andcredittoprivatesectorslowingsharply.

Change in Credit Growth to the Private Sector, Average 2011–13 vs. 2016

-50

-40

-30

-20

-10

0

10

20

TCD

GAB

COG

AGO

GNQ

CMR

NGA

ZWE

CAF

GIN

ZMB

BFA

LBA

GHA

BWA

TZA

NAM

NER

ZAF

SLE

COD

MLI

GNB

GMB

LSO

RWA

KEN

MUS

UGA

TGO

SWZ

SEN

BDI

BEN

CPV

STP

ETH

COM

MWI

MDG

ERI

CIV

SYC

MOZ

Oil Exporters Other resource-intensive countries Nonresource-intensive countries

Perce

ntage

point

s


Theoutlookisstillsubduedwithmodestgrowthrebound,subjecttodownsiderisks,...

Real GDP Growth

0

1

2

3

4

5

6

2012 2013 2014 2015 2016 2017 2018 2019

Perce

nt


...anddrivenbythethreelargesteconomies.

Contributions to Regional Real GDP Growth, 2016―17

AFewWordsonSouthAfrica

24

Policyuncertaintyhasincreasedandconfidenceremainsveryweak

25

0102030405060708090100

-20-15-10-505

1015202530

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

BERPoliticalConstraints(RHS)1/BERConsumerConfidenceIndex(LHS)2/BERBusinessConfidenceIndex(RHS)3/

PolicyUncertaintyandConfidence

1/BERPoliticalConstraintsshows thepercentageofmanufacturerswhoconsiderthepoliticalclimateasabusinessconstraint.2/BERConsumerConfidenceIndexisexpressedasanetbalance.Thenetbalanceisderivedasthepercentageofrespondentsexpecting animprovementlessthepercentageexpecting adeterioration.3/BERBusinessConfidenceIndexshowsthepercentageofbusinessrespondentswhoconsidercurrentbusinessconditionsas"satisfactory"asopposedto"unsatisfactory".

Agricultureandminingstabilizationdrivethe2017recoverywithbusinesscyclesensitivesectorstakingoverthereafter

26

- 1.0

-0.5

0.0

0.5

1.0

1.5

2.020

14

2015

2016

2017

2018

2019

ContributionstoGrowth- Supply(percent)

Other Finance,realestateandbusinessservicesWholesaleandretailtrade;hotelsandrestaurants Mining andquarryingAgriculture,forestryandfishing RealGDP

Projections

Sources:StatsSAandIMFstaff calculations.- 1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.520

14

2015

2016

2017

2018

2019

ContributionstoGrowth- Supply(percent)

OtherFinance,realestateandbusinessservicesWholesaleandretailtrade;hotelsandrestaurantsMining andquarryingAgriculture,forestryandfishingRealGDP

Projections

Sources:StatsSAandIMFstaff calculations.

Slowinggrowthhasbeenreflectedinweakemploymentcreationwhichgroundtoahaltin2016

27

-5

-4

-3

-2

-1

0

1

2

3

4

520

09

2010

2011

2012

2013

2014

2015

2016

Q1-20

17

Formalsector- Public Formalsector- Other InformalsectorAg riculture Privatehouseholds Employmentgrowth

EmploymentGrowth:ContributionbySector(percent)


Headlineinflationisexpectedtoreturnwith3-6bandpercentbyend2017

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2014 2015 2016 2017 2018 2019 2020Source:IMF staffestimates.

HeadlineInflation(y/ypercentchange)

Projections


Afterimprovingin2016,currentaccountbalanceisexpectedtograduallydeteriorateasgrowthpicksup

-7

-6

-5

-4

-3

-2

-1

0

1

2013 2014 2015 2016 2017 2018 2019 2020

GoodsandservicesIncomeTransfersCurrentaccount

CurrentAccount(PercentofGDP)

Sources:SARBandIMFstaffcalculations.

Fiscalconsolidationisexpectedtocontinue

-2

-1

0

1

2

3

420

05/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

2013

/14

2014

/15

2015

/16

2016

/17

2017

/18

2018

/19

2019

/20

StructuralPrimaryBalance(percentofGDP)

Fiscalimpulse StructuralPrimaryBalance Projections

1/Uniform increaseinfiscalimplusenecessarytoreachauthoritiesFY17/18debttarget.

…tostabilizepublicdebtinthemediumterm

35

40

45

50

55

6020

12

2013

2014

2015

2016

2017

2018

2019

PublicDebt(percentofGDP,calendaryearbasis)

StaffBaseline2016BudgetEMMedian2017Budget

Projections


Outline

32



Adjustment

Financing


Threepriorityareastoensureastrongeranddurablerecovery:

ØReinforceemphasisonmacroeconomicstability

ØStructuralreformstosupporthealthiermacrobalances

ØStrongeremphasisonsocialprotection


Whatsupportsgrowthspells:improvedpolicies,betterinstitutions,fewermarketdistortions,andabetterexternalenvironment.

34

Sub-Saharan Africa: Impact on Spell Duration (Years)

Note: Each bar shows the change in the expected duration of a growth spell (in numbers of years) if a variable improves by 25 percentile points from the median value in the sample of sub-Saharan African countries, while holding other variables constant.

012345678

Tradeopenness

Inflation Investmentto GDP

Total publicdebt

Oil price,change

Terms oftrade

growth

Polity 2,cumulative

change

Real GDPper capita

growth

Relative priceof

investment toconsumption

Macroeconomic Variables External Shocks Institutions Other

Impa

ct of

an im

prov

emen

t of 2

5 pe

rcen

tile po

ints s

tartin

g fro

m

the m

edian


MoreemphasisonadjustmentneededinmanycasesHardest-hitresource-intensivecountries:• Strongfiscalconsolidationrequired,withstrongfocusonrevenue

mobilization• Whereavailable,greaterexchangerateflexibility/eliminationof

exchangerestrictionsimportant

Othercountries:• Wheregrowthisstillstrong,emergingvulnerabilitiesneedtobe

addressedfrompositionofstrength• Infrastructureinvestmentneedstobeaddressedthroughhigher

revenuemobilizationtosafeguarddebtsustainability


Reformsneededtosupportmacroobjectives

ØDomesticrevenuemobilization

ØGreateremphasisonsafeguardingfinancialstability

ØFosteringeconomicdiversification

ØState-ownedenterprisereformstolimitcontingentliabilities


Strongeremphasisonsocialprotectionnecessary

Ø Lowgrowthandwideningmacroeconomicimbalancesriskaggravatingsocialdislocationandincreasingpoverty

Ø Socialprotectionprogramsoftenfragmented,notwell-targeted,andcoverasmallshareofthepopulation

ØNeedtobettertargettheseandalsousesavingsfromregressiveexpendituressuchasfuelsubsidiestohelpvulnerablegroups


Conclusion

38

q Strongdomesticpolicyresponsetorevivegrowth

q Macroeconomicandstructuralpolicies

Ø Countrieswheregrowthhasslowedè focusonmacroeconomicstabilitytosetthestageforagrowthturnaroundthatcanbesustained

Ø Countriesenjoyingagrowthspellè addressemergingvulnerabilitiesandfocusonprolonginggrowth

Ø Allcountriesè complementingeffortstounlockgrowthpotential


Thankyou!Theonlineeditionofthe

RegionalEconomicOutlookforsub-SaharanAfrica

isnowavailableonlineatwww.imf.org

HOW TO RESTART AFRICA’S GROWTH ENGINE › site › uploads › 2017-06-22-imf … · Frontier and...

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