Oil-importing African countries including Central African Republic, Cote d’Ivoire, and Ethiopia are showing an improved business environment as the continent endures its slowest growth in more than two decades, according to the International Monetary Fund.
Some countries that are doing better are benefiting from low prices for imported oil, continuing to build infrastructure and are predicted to grow at more than 6 percent, IMF said in its latest Regional Economic Outlook for Sub-Saharan Africa.
Other countries that are faring better include Kenya, Liberia, Mali, Niger, Sierra Leone, Senegal, and Tanzania.
In contrast, countries that export commodities are under economic pressure due to low oil prices including three of Africa’s largest economies — Angola, Nigeria, and South Africa.
The Democratic Republic of Congo, Ghana, Zambia and Zimbabwe have also been adversely affected according to the report. Equatorial Guinea is the only oil exporter that is an exception.
The report predicts average growth will fall to 1.4 percent in 2016, less than half of 2015 growth and far below the 5 percent-plus growth from 2010 to 2014. GDP per capita will also contract for the first time in 22 years, according to the report.
There are two main reasons for this sharp slowdown, said Abebe Aemro Selassie, head of the IMF’s African department. “First, the external environment facing many of the region’s countries has deteriorated, notably with commodity prices at multi-year lows and financing conditions markedly tighter. Second, the policy response in many of the countries most affected by these shocks has been slow and piecemeal, raising uncertainty, deterring private investment and stifling new sources of growth.”
Non-commodity exporters, around half of the countries in sub-Saharan Africa, continue to perform well with growth levels at 4 percent or more.
Most commodity exporters, however, are under severe economic strain. This is true for five of the six countries from the Central African Economic and Monetary Union, whose near-term prospects have worsened significantly in recent months despite the modest uptick in oil prices.
The Central African Economic and Monetary Community (CEMAC) is made up of six countries: Gabon, Cameroon, the Central African Republic (CAR), Chad, the Republic of the Congo and Equatorial Guinea.
In these countries, repercussions are spreading beyond oil-related sectors to the entire economy, IMF reported.
An acute drought compounded economic problems in large parts of eastern and southern Africa.
If policy makers take strong action in the coming months, especially in the largest economies, growth could recover to close to 3 percent in 2017, the report said.
Exchange rates have been slow to adjust in some oil-exporting countries, putting pressure on deposits and foreign exchange reserves. This has discouraged investments and affected economic growth, Face2Face Africa reported:
All these factors can be attributed to a global trend of economic volatility. International trade partners, such as the United States and the United Kingdom, have also reported slowed economic growth. The decision by the United Kingdom to leave the European Union has not helped matters.
China’s recent policy to transition from a manufacturing to a services-based economy has also played a factor. For more than a decade, the Chinese had consistently relied on African commodity exporters for their raw materials.
Source: AFK Insider