The International Monetary Fund (IMF) has forecast 5.75 percent growth for the sub-Saharan African economy in 2014 despite fears the Ebola viral disease currently ravaging West Africa could affect economic activity within the region.
According to the IMF’s October 2014 Regional Economic Outlook for Sub-Saharan Africa report, set to be released today in the Tanzanian capital Dar es Salaam, the positive outlook for 2014 continues a recent growth trajectory for the regional economy, after it recorded 5 percent growth last year.
The Fund’s projection is underpinned by continued public investment in infrastructure, buoyant services sectors, and strong agricultural production. The momentum is particularly pronounced in the region’s low-income countries, where activity is forecast to accelerate to 6.75-7 percent in 2014-15.
“This positive picture, however, co-exists with the dire situation in Guinea, Liberia, and Sierra Leone, where, beyond the unbearable number of deaths, suffering and social dislocation, the Ebola outbreak is exacting a heavy economic toll, with economic spillovers starting to materialise in some neighboring countries,” Antoinette Sayeh, Director of the IMF’s Africa Department, said.
“In addition, the baseline scenario of solid growth is predicated on a number of increasingly potent downside risks being lifted. Should the Ebola outbreak be more protracted or spread to more countries, it would have severe consequences for activity in the affected countries and larger spillovers.”
Countries affected by the Ebola outbreak have seen their fiscal accounts come under considerable pressure and the Fund called for support to be provided through grants from donors to enable the countries accommodate higher Ebola-related spending and to help avoid an even more pronounced decline in economic activity.
“When grants are not immediately forthcoming, and provided that the public debt levels remain manageable, fiscal deficits should be allowed to widen, subject to the availability of financing,” the Fund stated.
‘Staying the Course’
The report said with the external environment turning less supportive, a more pronounced slowdown in emerging markets, particularly China, or a disorderly normalisation of monetary policy in the United States could have a protracted impact on the region’s economies.
In that context, for the vast majority of countries in the region, sustaining high growth rates remains the key policy consideration, including to foster job creation and reduce poverty.
Titled “Staying the Course”, the report said policies should continue to emphasise growth-enhancing measures.
“In particular, the focus should be on boosting fiscal revenue mobilisation, channeling spending towards infrastructure investment and other development needs, safeguarding social safety nets to encourage more inclusive growth, and improving the business climate.
“But it will also be important to pay attention to macroeconomic constraints, avoid over reliance on volatile capital flows and prevent the widening of macroeconomic imbalances of a permanent nature. Monetary policies should continue to focus on consolidating the gains achieved in recent years in reducing inflation, including by tightening in countries with rapid growth and persistent high inflation.”