Black Affairs, Africa and Development
Sub-Saharan Africa to grow 6 pct next year – IMF
By Joe Brock and Tim Cocks
ABUJA/LAGOS, Oct 31 (Reuters) – Sub-Saharan Africa's economic growth is expected to increase to 6 percent in 2014, from 5 percent this year, supported by investment in infrastructure and production capacity, the International Monetary Fund said on Thursday.
The IMF had predicted in May that the region would grow 5.7 percent this year and 6.1 percent in 2014.
It said the slight downward revisions were due mainly to weaker global economic conditions, while budget delays in oil producer Angola and oil theft in Africa's top crude exporter Nigeria also hurt growth.
Inflation on the continent is expected to be less than 6 percent next year, its third year of decline due to benign prospects for food prices and the continuation of prudent monetary policies, the IMF said.
"Countries like Kenya and Uganda were in high double digit inflation and are now in single digits, and a lot of it has to do with the conduct of monetary policy," IMF Africa director Antoinette Sayeh told Reuters after the report's launch in Nigeria's commercial capital, Lagos.
The fund expects growth to pick up next year.
"The improvement relative to 2013 reflects higher global growth, especially in Europe, and other expected favourable domestic conditions," the IMF said in its regional report, giving Nigeria's electricity reforms and hopes of improved oil output there as an example.
"The main factor behind the continuing underlying growth in most of the region is … strong domestic demand, especially associated with investment in infrastructure."
Despite the strong growth outlook, the region remains vulnerable to lower commodity prices and a slowdown in developed and emerging economies, the report said.
The strongest growth will be felt in mineral-exporting and low-income countries, the IMF said, with examples such as the Democratic Republic of Congo, Mozambique and Sierra Leone.
Africa's top economy South Africa is expected to grow 2 percent this year and 2.9 percent in the next, as it lags the broader region due to the relative maturity of its industrial, extractive and services sectors.
South Africa has suffered this year from industrial strikes, slowing private investment and disposable income growth and weakening consumer confidence, the IMF said.
The World Bank sees growth of 5.3 percent for sub-Saharan Africa in 2014, underpinned by strong private and public investment.
The IMF gave similar policy prescriptions to previous reports. It recommended African nations allow their currencies to fall if they were being pressured by low commodity prices or capital outflows rather than propping them up too much.
Some nations, such as Nigeria, intervened to prop up currencies after portfolio outflows surged between May and August.
"We certainly don't dispute there are occasions when there is undue volatility that needs to be dealt with," Sayeh said. However, she added: "Exchange rate flexibility is important … for countries like Nigeria."
The IMF also said that African economies were more vulnerable to volatile portfolio flows than ever before.
It suggested "capital flow measures", meaning restrictions on capital coming in or out, should only be used to combat volatility as a last resort, after addressing imbalances in things such as interest rates had been tried.
"You could adopt measures … so you have less of the footloose short term money and a bit more of the longer term," fund deputy director Abebe Selassie told Reuters. "But it's not something you want to use in the first instance."