According to the IMF’s latest forecasts, Africa’s economic development is moving forward at two growth rates, with some countries – such as top-performing Ethiopia– seeing exponential growth but others putting the brakes on.
According to the IMF’s Regional Economic Outlook, after modest GDP growth of 1.4% in 2016 – the lowest growth rate in the past two decades – Sub-Saharan Africa will see growth rise to 2.5% in 2017. However, this 2.5% average will be the result of divergent individual country numbers.
Non-oil producing countries (including Burkina Faso, Ethiopia, Ivory Coast, Rwanda, Senegal and Tanzania) will see growth of over 6% – the highest on the continent. The Ethiopian economy – which has a potential market of 100 million people – looks set to expand the most, with GDP expected to grow by 7.5% in 2017. This follows a halt in GDP growth at 6.5% in 2016 due to El Nino, an atmospheric phenomenon in the Pacific that brought severe drought to most of East Africa. Ethiopia also managed to stabilise unemployment at 5.7% in 2016, and youth unemployment remained steady at 8.1%.
Despite resuming oil production, Nigeria and Angola are expected to grow less than other countries: 0.8% and 1.3%, respectively. South Africa, another large African economy, will instead see GDP growth halt at 0.8%. These three countries – which together represent 60% of Sub-Saharan Africa’s economy – have been hit by falling prices of raw materials that account for a large part of their export revenue.
Nigeria’s situation is emblematic of expectations versus reality. The country – which is considered the most promising economy in the region thanks to its massive oil reserves, natural gas and other raw materials (tin, coal, iron, zinc, lead, gold and uranium), and whose GDP overtook South Africa’s – proved poorly able to react to price fluctuations that, according to IMF forecasts, will stay well below the peaks recorded in 2013. According to the International Energy Agency’s latest report, the global oil market is very close to balance, even though weak growth in demand and robust US production indicate that the attempt by the Organization of the Petroleum Exporting Countries (OPEC) to halt supply in order to increase prices remains a tall order. Finance experts predict that the Nigerian government will double its efforts to relaunch the economy. The IMF expects Nigeria to adopt a series of reforms, including the elimination of currency restrictions and the multiple exchange rate system recently implemented to cushion economic shocks.
South Africa’s political instability and especially its replacement of various finance ministers have weighed heavily on the country, which has been downgraded several times by rating agencies. On 3 April, Standard & Poor’s lowered the country to a BB+: a non-investment, or junk, grade rating. A week later, Fitch followed suit, and Moody’s BAA2 rating was only just above the junk level.
Despite this situation, the overall recovery expected by the end of 2017 is predominantly due to Nigeria’s increased oil production, Angola’s increased public spending in view of its August elections, and the end of the drought that hit southern Africa, hurting the agricultural sector. This drought is also now having effects on the western part of the continent and has led the World Bank to reduce growth estimates for certain countries in the region, including Kenya (which is nonetheless expected to see high levels of development). The Washington-based institute’s report predicts that Kenya will see 5.5% growth in 2017, lower than last year’s 5.9%.
That said, Sub-Saharan Africa has seen stable economic development since 2000. According to the director of the IMF’s African Department, Abebe Aemro Selassiel, Sub-Saharan Africa “remains a region with tremendous potential for growth in the medium term, but with limited support expected from the external environment, strong and sound domestic policy measures are urgently needed to reap this potential”.
The IMF report sets out the three main ways African countries must take action to ensure continued growth: (i) macroeconomic stability for countries most affected by the crisis; (ii) tax responsibility and economic diversification; and (ii) social security.