Regional Imbalances and Shocks: Africa Domenico Fanizza Private - - PowerPoint PPT Presentation

Regional Imbalances and Shocks: Africa

Domenico Fanizza

International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, April 2011. 2

• Six-fold increase in

volumes

• Shift towards private

sector

1Private versus official refers to destination of flows.

Private vs. Official Financing to Sub-Saharan African Countries1

3

• Global

Factors

– Excess liquidity – Low yields

• Local Factors

– Policy rates – Government securities yields – Political uncertainty

Strong Recovery Moderate Recovery Little Change Decline FDI Ghana, Mauritius Kenya, Zambia Tanzania, Uganda Nigeria Portfolio Ghana, Mauritius Kenya, Zambia Tanzania, Uganda Nigeria Other Ghana, Mauritius, Zimbabwe Kenya Tanzania, Uganda Nigeria

1There are insufficient quarterly data for Angola, Mozambique, and Senegal.

Developments in Private Capital Flows during 20101

4

• Areas of strong

performance by SSA FMs

– Growth prospects – Macroeconomic

• utcomes

– Institutional quality

SSA Non- frontier Markets SSA Frontier Markets Other Frontier Markets Emerging Markets Macroeconomic conditions GDP in billions of U.S. dollars (average) 7 40 93 226 GDP growth projection in percent (average 2011–15) 5.3 6.2 5.5 4.9 External debt stocks in percent of GNI (2008) 70.6 21.7 49.2 25.9 Public sector management Strength of legal rights index (0 = weak to 10 = strong) 3.9 6.4 5.9 6.1 Total tax rate in percent of profits 79.5 37.0 41.8 44.3 Note: Group ranking in individual series, by color: 1st rank 2nd rank 3rd rank 4th rank

Comparison of Key Indicators, 2009

. 5

Sub-Saharan Africa: Selected Indicators, 2011 Number of Countries Share of Population PPPGDP Weights GDP per Capita (Percent) (Percent) (U.S. dollars) Oil Exporters 7 27 34 2,130 Middle-income Countries 8 8 33 7,165 Low-income Countries1 29 66 33 574 Sources: IMF, World Economic Outlook; and IMF, African Department database.

1/ Non-oil LICs

A useful analytical grouping of countries in sub-Saharan Africa:

• il exporters, middle and low-income countries

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Average Stock of Portfolio Investment Liabilities1 Sub-Saharan Africa Frontier Markets: Consolidated Foreign Bank Claims

1 Excludes Liberia, Mauritius, Nigeria, and South Africa

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Four themes set to dominate the policy agenda:

• 1. Recovery to pre-crisis growth rates is underway in most countries
• 2. The crisis has nonetheless caused considerable dislocation
• 3. Tension between the need to rebuild policy buffers and the longer-term

spending needs

• 4. And now countries need to deal with another food and fuel price shock–
• ne that may be more persistent than in 2007-08.

International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, April 2011. 8

9

Real GDP Growth

• Employment outcomes

– an extreme case is South Africa

• Smaller members of the South Africa

Customs Union hit badly too – exports of precious stones declined – revenues from import duties dropped

• Fiscal policy

– In some countries, fiscal policy had to be tightened (e.g. Ghana and Angola)

• Elsewhere, including in the many LICs

where growth decelerated only marginally, those at the margins of the labor market were likely also affected greatly.

. 10

International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, April 2011. 11

12

• In a number of countries, the harvest

has been strong keeping domestic prices contained

• The increase in world prices has also

been less uniform across major crops than in 2008

• Nonetheless, domestic food prices have

increased sharply in a number of

• countries. Factors at work include poor

harvests (e.g. Kenya), net staple food importers being hit by higher international prices (Ethiopia), political crisis (Madagascar).

• To cushion the adverse effects, some

countries have introduced price controls and subsidies.

13

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• Fiscal policy

– Should continue to move away from supportive stance of the last few years to a more neutral stance as soon as feasible – Focus should be on rebuilding policy buffers

• Monetary policy

– Given the recent uptick in inflation, there is need for tightening bias in most countries

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Where food price increases have been pronounced, interventions targeted at the neediest groups should be adopted What of fuel price subsidies? In general, these should be avoided because they are regressive and very costly

Sub-Saharan Africa: Overall Balance Excluding Grants, 2000–12

. 16

• Recovery is under way in most of the region’s oil

exporters and low-income countries; southern Africa is where recovery to pre-crisis growth rates is likely to be beyond reach for some time

• Growth in many low income countries barely slowed in

the global recession and is again comfortably above 5 percent.

• Eastern Africa countries are faring particularly well:

Mozambique, Tanzania, Uganda and Malawi and Zambia. Also some oil exporters: Nigeria, Republic of Congo.

• Resilience evident throughout SSA, mainly because of

much improved policies prior to global recession.

• Risks now come from rising government debt levels in

some countries and the current food and fuel price shock, which will impact on poverty, fiscal and external balances and inflation.

> 7 3.5 – 7 2 – 3.5 0 to 2 <0

Real GDP Growth (in percent)

Sub-Saharan Africa: 2011 Growth Outlook