Nigeria and South Africa are the biggest economies in sub-Saharan Africa (SSA), but growth prospects for both nations have been clouded by political uncertainty linked to the tenure of their leaders, the International Monetary Fund (IMF) said in a report released on Monday.
Economic growth is expected to rise to 3.4 percent in SSA next year from 2.6 percent in 2017, the IMF said in the report, however rising debt and political risks in larger economies will weigh down future growth, it warned.
“Key downside risks to the region’s growth outlook emanate from the larger economies, where elevated political uncertainty could delay needed policy adjustments and dampen investor and consumer confidence,” the IMF said in the report launched in Harare, Zimbabwe.
“A further pickup in growth is expected in 2018, but momentum is weak, and growth will likely remain well below past trends in 2019.”
The IMF said a good harvest and recovery in oil output in Nigeria would contribute more than half of the growth in the region this year, while an uptick in mining and a better harvest in South Africa as well as a rebound in oil production in Angola would add to growth.
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Gross domestic product in Nigeria, the continent’s largest economy, advanced for the first time in six quarters in the three months ended June 2017, from a year earlier, growing 0.55 percent, the National Bureau of Statistics (NBS) said last month.
In South Africa, GDP expanded 2.5 percent in Q2 from the previous quarter, ending the second recession in almost a decade.
Political uncertainty is growing in Nigeria, where President Muhammadu Buhari has been afflicted by illness, causing speculation about whether he is well enough to run Africa’s biggest economy.
South Africa has been clouded by the rule of Jacob Zuma, who has battled scandals, including corrupt allegations ahead of his ANC party’s conference in December to elect a new party leader.
In the continent’s most-industrialised economy, low demand for its commodity exports and political turmoil have weighed on output. Two ratings companies cut its international debt to junk in April after President Jacob Zuma fired Pravin Gordhan as finance minister, with the changes battering business and consumer confidence.
To help maintain growth, countries should diversify from dependence on commodities and oil, implement fiscal reforms to stimulate growth and attract private investment, the IMF said.
The IMF said Africa public debt would rise to 53 percent of GDP this year from 48 percent in 2016. More worryingly, most countries were now borrowing from local banks, which could destabilise the domestic financial sector and fuel inflation.
Debt servicing costs were also up, but high debt levels were in particular complicating the economic outlook for six nations, including Zimbabwe, which is gripped by a crunch forex shortage.
“Debt servicing costs are becoming a burden, especially in oil-producing countries … and are expected to absorb more than 60 percent of government revenues in 2017,” IMF said.
While some countries had made progress in reducing their fiscal deficits, others, like Africa’s most advanced economy South Africa would see the deficit widen.
South Africa last week raised its estimate for this year’s budget deficit, saying the country faced sluggish economic growth, shortfalls in revenue and costly bailouts of struggling state-owned companies.
In July, the South African central bank halved its economic growth prediction for this year to 0.5 percent.
Nigeria released a four-year programme in March that aims to boost growth to 7 percent by 2020 through lifting oil output, opening farmland and increasing investment in power, roads, rail and ports.
PATRICK ATUANYA
