Regional Economic Outlook for sub-saharan Africa African Department International Monetary Fund November 3, 217
Outline 1. Sharp slowdown after two decades of strong growth 2. A partial and tentative policy response 3. Near-term macroeconomic challenge Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 4. Medium-term prospects remain strong Demographic dividend Technology facilitating stronger catch-up growth 2
Since the mid 199s, most sub Saharan African countries have been registering high growth rates 8 7 6 5 4 3 2 1.4 1-1 -2 197 1972 1974 1976 1978 198 1982 1984 1986 1988 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 216 Percent 3
Important progress in human development 1,2 1, 199 216 12 1 Per 1, live births 8 6 4 Per 1, births 8 6 4 2 2 Maternal mortality Infant mortality Developments in sub-saharan Africa 4
Three broad factors have facilitated the strong growth Better policies and institutions Capital Inflows High Commodity Prices 5
But in 216 growth slumped sharply and only a modest recovery is expected 8 Real GDP growth, percent 7 6 5 4 3 2 1 Sub-Saharan Africa Sub-Saharan Africa excluding Nigeria and South Africa 213 214 215 216 217 proj. 218 proj. 219 proj. Developments in sub-saharan Africa 6
The recovery is not sufficient to raise per capita growth in many countries 33 12 57% 43% Number of countries Percent of population Developments in sub-saharan Africa 7 Negative real GDP Positive real GDP per capita growth per capita growth
Oil exporting economies have been hit the most 8 6 Median real GDP growth, percent 4 2-2 -4-6 Oil exporters (8 countries) Other resource-intensive countries (15 countries) Non-resource-intensive countries (22 countries) 213 214 215 216 217 proj. 218 proj. 219 proj. Developments in sub-saharan Africa 8
Outline 1. Sharp slowdown after two decades of strong growth 2. A partial and tentative policy response 3. Near-term macroeconomic challenge Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 4. Medium-term prospects remain strong Demographic dividend Technology facilitating stronger catch-up growth 9
Easier financing conditions have brought frontier economies back to the market Sub-Saharan African frontier market international bond spreads, basis points 1,1 1, 9 8 7 6 5 4 3 International sovereign bond issuances, bllions of US dollars 8 7 6 5 4 3 2 1 Sub-Saharan African non-oil exporters Sub-Saharan African oil exporters 2 Jan-11 Sep-12 May-14 Jan-16 Sep-17 Developments in sub-saharan Africa 211 213 215 217:Q2 1
Exchange rate pressures have eased in many countries the case of Nigeria Nigerian exchange rates, Naira per US dollar 55 5 45 4 35 3 25 2 Interbank market Parallel rate Official Rate 15 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Developments in sub-saharan Africa 11
Fiscal deficits are stabilizing Overall fiscal balance, percent of GDP 2 1-1 -2-3 -4-5 -6-7 Oil exporters Interquartile range Median 2 1-1 -2-3 -4-5 -6-7 Other resourceintensive countries Interquartile range Median 2 1-1 -2-3 -4-5 -6-7 Non-resourceintensive countries Interquartile range Median -8 211 213 215 217-8 211 213 215 217-8 211 213 215 217 Developments in sub-saharan Africa 12
Outline 1. Sharp slowdown after two decades of strong growth 2. A partial and tentative policy response 3. Near-term macroeconomic challenge Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 4. Medium-term prospects remain strong Demographic dividend Technology facilitating stronger catch-up growth 13
Debt stocks have risen throughout the region Oil exporters Other resourceintensive countries Non-resourceintensive countries 7 6 Interquartile range Median 7 6 Interquartile range Median 7 6 Public debt, percent of GDP 5 4 3 2 5 4 3 2 5 4 3 2 Interquartile range Median 1 211 213 215 217 1 211 213 215 217 1 211 213 215 217 Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 14
Driven by large fiscal deficits and depreciation Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 15
Debt service costs have increased Total debt service, percent of revenue 3 25 2 15 1 5 Interquartile range Sub-Saharan Africa median Oil exporters median 21 211 212 213 214 215 216 217 proj. Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 16
Median public debt, percent of GDP Fiscal consolidation plans need to be implemented 1 9 8 7 6 5 4 3 2 Oil exporters Baseline 1 9 8 7 6 5 4 3 2 Other resourceintensive countries Baseline 1 9 8 7 6 5 4 3 2 Non-resourceintensive countries Baseline 1 211 214 217 22 1 211 214 217 22 1 211 214 217 22 Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 17
Fiscal consolidation plans need to be implemented Median public debt, percent of GDP 1 9 8 7 6 5 4 3 Oil exporters Baseline 1 9 8 7 6 5 4 3 Other resourceintensive countries Baseline 1 9 8 7 6 5 4 3 Non-resourceintensive countries Baseline 2 2 2 1 211 214 217 22 1 211 214 217 22 1 211 214 217 22 Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 18
Fiscal consolidation plans need to be implemented Median public debt, percent of GDP 1 9 8 7 6 5 4 3 Oil exporters No adjustment Baseline 1 9 8 7 6 5 4 3 Other resourceintensive countries No adjustment Baseline 1 9 8 7 6 5 4 3 Non-resourceintensive countries No adjustment Baseline 2 2 2 1 211 214 217 22 1 211 214 217 22 1 211 214 217 22 Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 19
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 1.2 1.2 1. 1. 1. Real GDP growth, percent.8.6.4.2..2.4.7.8.6.4.2..2.4.5.8.6.4.2..2.4.2.6 1 2 3 4 5.6 1 2 3 4 5.6 1 2 3 4 5 Years Years Years Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 2
Significant potential for raising tax revenues Tax ratio, percent of GDP 25 2 15 1 5 Actual tax Tax potential Oil exporter Resourceintensive countries Non-resource intensive countries Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 21
Diversification offers a path to growth GDP per capita growth, 1962 214 percent 15 1 5-5 SSA oil exporters SSA non-resource-intensive BWA SSA other resource-intensive Other countries 1 2 3 4 5 6 7 Average export diversification, 1962 214 (Higher values = less diversification) UGA GNQ Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 22
Usual factors important for diversification Income Inequality (Gini) Residual of export diversification 2-2 SSA Non-SSA -4 -.1.1.2 Residual of Gini Access to Electricity Residual of export diversification 2-2 -4 SSA Non-SSA -4-2 2 4 Residual of access to electricity, percent 23
Usual factors. (cont) Credit to private sector Ease of doing business Residual of export diversification 2-2 -4 SSA -5-25 25 5 75 1 Residual of credit to private sector, percent Residual of export diversification 2 1-1 -2-3 SSA -1 -.5.5 1 1.5 Residual of ease of doing business 24
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
Outline 1. Sharp slowdown after two decades of strong growth 2. A partial and tentative policy response 3. Near-term macroeconomic challenge Addressing debt vulnerabilities Emphasis on revenue mobilization Fostering economic diversification 4. Medium-term prospects remain strong Demographic dividend Technology facilitating stronger catch-up growth 26
Globally, working age population is projected to decline sharply in coming years 3. Percent 2.5 2. 1.5 1..5. -.5 World World excluding Sub-Saharan Africa -1. 195 1965 198 1995 21 225 24 255 27 285 21 27
By around 23, half the increase in global work force will come from sub Saharan Africa 35 3 25 Change in 15-64 Year Old Population China Rest of world Sub-Saharan Africa Millions of persons 2 15 1 5-5 -1 195 1965 198 1995 21 225 24 255 27 285 21 28
FinTech for financial inclusion In some countries, mobile account growth outpaced bank account 7 Countries with more mobile accounts than bank accounts (% age 15+) in Sub-Saharan Africa, 214 12, Central Africa Southern Africa 6 5 4 Mobile account Bank account 1, 8, Western Africa Eastern Africa 3 6, 2 4, 1 2, Dec-12 Dec-13 Dec-14 Source: Global Findex, World Bank Source: GSMA Mobile Money
Mobile account (% age 15+) in Sub-Saharan Africa, 214 Kenya Uganda Tanzania Cote d'ivoire Zimbabwe Botswana Rwanda South Africa Ghana Zambia Mali Namibia Congo, Dem. Rep. Gabon Senegal Sierra Leone Madagascar Niger Malawi Burkina Faso Nigeria Benin Congo, Rep. Cameroon Guinea Togo Mauritius Burundi 6.6 6.2 4.5 4.4 3.9 3.8 3.1 2.3 2. 2. 1.8 1.5 1.4.9.7 14.4 13. 12.1 11.6 1.4 9.2 24.3 21.6 2.8 18.1 35.1 32.4 1 2 3 4 5 6 Source: Global Findex, World Bank 58.4 3
Thank you! The online edition of the Regional Economic Outlook for sub-saharan Africa is now available online at www.imf.org 31