By Jacques Nel, Chief Economist: Southern and East Africa, NKC African Economics
The International Monetary Fund (IMF) released its World Economic Outlook (WEO) report for April 2018. Entitled “Cyclical Upswing, Structural Change”, the largely positive report notes that global economic growth has not been this strong and broad-based since the sharp 2010 bounce-back following the 2008-09 financial crisis.
Global real GDP growth is projected to reach 3.9% this year, which is slightly higher than the October projection of 3.7%. The Fund’s growth forecast for sub-Saharan Africa (SSA) remains at 3.4% for this year. This reflects a notable improvement from the 2.8% growth estimate for 2017. The Middle East and North Africa (Mena) region is also projected to grow by 3.4% this year, which is markedly higher than the 2017 growth estimate of 2.6% and slightly stronger than the October projection of 3.2% for 2018.
The latest update includes some notable revisions to individual country growth projections for this year.
Algeria saw the largest upward revision to its 2018 growth forecast from a projection of 0.7% made in October to the latest figure of 3.0%. The oil exporter continues to struggle to adapt to structurally lower energy prices, but higher oil- and gas-related fiscal revenue is expected to support the government’s planned increase in capital spending this year.
Zimbabwe is another country that saw a sizeable upward adjustment in its 2018 growth forecast (from 0.8% made in October to the current figure of 2.4%), with the IMF evidently giving newly installed President Emmerson Mnangagwa the benefit of the doubt over whether his promising rhetoric will be converted into action.
Furthermore, most of the continent’s economic giants also saw upward revisions to their 2018 growth projections, including Nigeria (due to an improved outlook for oil revenue and the introduction of forex measure to ease liquidity constraints), Angola (due to stronger oil prices), Egypt (due to stronger domestic demand and the effects of structural reforms), and South Africa (due to ‘Ramaphoria’).
At the other end of the spectrum, some countries saw notable reductions in their 2018 growth projections.
Libya saw the largest downward revision, from an October projection of 31.2% to the latest figure of 16.4%. The IMF made significant downward revisions to its historical estimates for Libya’s GDP in 2015 and 2016 while increasing the estimate for real GDP in 2017. This led to an estimate of 71% real GDP growth for 2017 compared to the 55% growth forecast made in October. These wild revisions in estimates speak to the difficulties involved given the scarcity of solid economic data for the country and its total dependence on oil exports.
A notable downward revision in Ghana’s 2018 growth projection saw the West African nation conceding the title of the fastest-growing SSA economy to its East African counterpart Ethiopia – these were also the two fastest growing economies in the region in 2017, according to IMF estimates. A slowdown in industrial output due to maintenance work at the Jubilee oil field coupled with indications of a smaller cocoa crop this season have resulted in a 2.6 percentage point reduction in the country’s 2018 growth forecast, now set at 6.3%.
Mozambique saw its growth projection drop from 5.3% in October to the latest figure of just under 3%. The country continues to struggle with elevated real interest rates, while the decision by creditors to reject all the government’s debt restructuring proposals in March has sustained a smog of uncertainty over the country’s economic future.
Sierra Leone, Lesotho and Namibia all saw notable downward revisions in their 2018 growth forecasts.
Stronger growth in Africa’s largest economies bodes well for the continent’s economic prospects as a whole.
South Africa, Nigeria and Egypt are regional growth drivers for Southern, West, and North Africa, respectively, and the health of these larger economies has direct bearing on growth prospects in their smaller neighbours.
It should be noted that the improvement in growth prospects for Nigeria and Angola is largely due to stronger oil prices, while South Africa’s expected recovery is still largely based on sentiment.
Nigeria still has much to do to diversify its economy away from its oil sector to improve economic resilience. In turn, South Africa’s political landscape has undoubtedly seen some improvement of late, but this positive sentiment still has to translate into actual progress on the economic front.