IMF trims sub-Saharan Africa's 2011 growth forecast

| Friday October 8, 2010 00:00

In its World Economic Outlook report, the IMF said belt tightening by some European nations to cut huge budget deficits could reduce aid and private financial flows to the region's low-income economies.

It trimmed its 2011 gross domestic product growth forecast for sub-Saharan Africa to 5.5 percent from the 5.9 percent rate estimated in July. The growth projection for 2010 was maintained at 5.0 percent. The region grew 2.6 percent last year.

Growth next year was seen powered by oil producers Angola and Nigeria, with low-income economies such as Ethiopia and Tanzania also lending a hand.

'The primary risk to the outlook for the region is a faltering global recovery,' the IMF said. 'For the oil-exporting economies, spillovers from a global slowdown would be manifested primarily through its impact on oil prices.'

A rebound in global trade contributed hugely to the region's strong recovery from the global financial rout.Middle- and low-income sub-Saharan African economies would be the hardest hit by a slowdown in the global recovery, the IMF said, noting that their exports to Europe were about a third of total exports.

'In addition to these trade linkages, continued weakness and measures to cut budget deficits in advanced economies may affect low-income economies of sub-Saharan Africa by reducing aid and private financial flows to the region,' it said. Despite the cloud of uncertainty, the IMF urged some governments in the region to start tailoring their fiscal policies towards addressing medium-term priorities.

Some governments in the region increased spending and cut interest rates to soften the blow on their economies from the global financial shakedown.

'Where output growth has recovered, (where) debt levels are rising, and (where) primary deficits are above levels that will stabilise debt over the medium-term, more prudent fiscal balances are in order,' the IMF said.

'However, where output growth is still weak, outstanding debt is low, and fiscal deficits are in check, there may be scope to sustain higher levels of spending in priority areas such as education, health and infrastructure investment,' it said.-(Reuters)