Fiscal Adjustment and Economic Diversification Regional Economic Outlook for Sub-Saharan Africa

Transcription

1 Fiscal Adjustment and Economic Diversification Regional Economic Outlook for Sub-Saharan Africa African Department International Monetary Fund November 16, 17

2 Outline 1. A modest growth recovery 2. Factors underpinning the subdued outlook 3. Policies to strengthen the recovery Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 2

3 Growth has picked up, but is set to remain subdued 8 Real GDP growth, percent Sub-Saharan Africa Sub-Saharan Africa excluding Nigeria and South Africa proj. 18 proj. 19 proj. Developments in sub-saharan Africa 3

4 The recovery is not sufficient to raise GDP per capita in many countries % 43% Number of countries Percent of population Developments in sub-saharan Africa 4 Negative real GDP Positive real GDP per capita growth per capita growth

5 Oil exporting economies are recovering 8 6 Median real GDP growth, percent Oil exporters (8 countries) Other resource-intensive countries (15 countries) Non-resource-intensive countries (22 countries) proj. 18 proj. 19 proj. Developments in sub-saharan Africa 5

6 Inflationary pressures are receding 14 Percent change, weighted average, year over year Headline Food Nonfood 4 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Developments in sub-saharan Africa 6

7 Why growth matters 15 Life expectancy, years ,0 2,400 2,0 2,800 3,000 3,0 3,400 GDP per capita, PPP (constant 11 international $) Developments in sub-saharan Africa 7

8 Important progress in human development 1,0 1, Per 0,000 live births Per 1,000 births Maternal mortality 0 Infant mortality Developments in sub-saharan Africa 8

9 Outline 1. A modest growth recovery 2. Factors underpinning the subdued outlook 3. Policies to strengthen the recovery Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification Developments in sub-saharan Africa 9

10 Easier financing conditions have brought frontier economies back to the market Sub-Saharan African frontier market international bond spreads, basis points 1,0 1, International sovereign bond issuances, bllions of US dollars Sub-Saharan African non-oil exporters Sub-Saharan African oil exporters 0 Jan-11 Sep-12 May-14 Jan-16 Sep-17 Developments in sub-saharan Africa :Q2

11 Exchange rate pressures have eased in many countries the case of Nigeria Nigerian exchange rates, Naira per US dollar Interbank market Parallel rate Official Rate 150 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Developments in sub-saharan Africa 11

12 Fiscal deficits are stabilizing Overall fiscal balance, percent of GDP Oil exporters Interquartile range Median Other resourceintensive countries Interquartile range Median Non-resourceintensive countries Interquartile range Median Developments in sub-saharan Africa 12

13 Current account balances have improved Current account balance, percent of GDP Avg proj. Avg Trade balance Primary income (net) Current account balance proj. Avg Services (net) Net transfers Oil exporters Other resource-intensive countries Non-resource-intensive countries proj. Developments in sub-saharan Africa 13

14 Outline 1. A modest growth recovery 2. Factors underpinning the subdued outlook 3. Policies to strengthen the recovery Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification Developments in sub-saharan Africa 14

15 Debt stocks have risen throughout the region Oil exporters Other resourceintensive countries Non-resourceintensive countries 70 Interquartile range Median 70 Interquartile range Median 70 Public debt, percent of GDP Interquartile range Median Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 15

16 Driven by large fiscal deficits and depreciation Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 16

17 Debt service costs have increased Total debt service, percent of revenue Interquartile range Sub-Saharan Africa median Oil exporters median proj. Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 17

18 Fiscal pressures pose risks to an already weakened financial sector :Q1 or latest available Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 18 CAF SLE GNQ NER LBR GHA CMR TCD AGO GIN TZA ZAF BWA NGA GAB NAM COG SEN MDG BDI SYC SWZ RWA UGA KEN MUS LSO MOZ Bank nonperforming loans, percent of total loans Resource-intensive countries Non-resource-intensive countries

19 Median public debt, percent of GDP Fiscal consolidation plans need to be implemented Oil exporters Baseline Other resourceintensive countries Baseline Non-resourceintensive countries Baseline Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 19

20 Fiscal consolidation plans need to be implemented Median public debt, percent of GDP Oil exporters Baseline Other resourceintensive countries Baseline Non-resourceintensive countries Baseline Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification

21 Fiscal consolidation plans need to be implemented Median public debt, percent of GDP Oil exporters No adjustment Baseline Other resourceintensive countries No adjustment Baseline Non-resourceintensive countries No adjustment Baseline Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 21

22 Fiscal multipliers are lower in SSA Impact on GDP growth of a 1 pp increase in 1.2 Investment-to-GDP ratio Consumption-to-GDP ratio Revenue-to-GDP ratio Real GDP growth, percent Years Years Years Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 22

23 Significant potential for raising revenues Tax ratio, percent of GDP Actual tax Tax potential 0 Oil exporter Resourceintensive countries Non-resource intensive countries Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 23

24 Diversification offers a path to growth GDP per capita growth, percent SSA oil exporters SSA non-resource-intensive BWA SSA other resource-intensive Other countries Average export diversification, (Higher values = less diversification) UGA GNQ Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 24

25 Getting the policy mix right and playing to your strengths Botswana: Expanding along the value chain Built on an existing position in the diamond industry Helped to create positive spillovers to supporting sectors Strong record of good governance Prudent economic management Uganda: Moving into manufacturing Expanded from agro-commodities to agro-processing Industrial clusters supported exports of light manufacturing Sustained macroeconomic stability Expanding regional trade supported export growth Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 25

26 Thank you! The online edition of the Regional Economic Outlook for sub-saharan Africa is now available online at 26