Maintaining Growth in an Uncertain World Regional Economic Outlook for Sub-Saharan Africa African Department International Monetary Fund November 13, 2012

Recent Developments and Near-term Outlook Risks to the Outlook Policy Choices 2 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012

3 Selected Regions: Real GDP growth, percent change from a year earlier, Q2 Selected Regions: Real GDP growth including projections,

4 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 Domestic demand, investment, have provided support Recovery from drought and new resource projects too Sub-Saharan Africa: Real GDP Growth,

5 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 Sub-Saharan Africa: Food and Nonfood inflation, May Sub-Saharan Africa: End-of-period CPI Inflation,

6 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 Sub-Saharan Africa: Overall Fiscal Balance, Sub-Saharan Africa: Government Debt Ratios,

7 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 Selected Country Groups: Exports (Three-month moving average, value index), May Selected Country Groups: External Current Account Balance,

8 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 Sub-Saharan Africa: Changes in Current Account and Investment,

9 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 Near-term outlook for growth remains positive Supply-side factors and stronger policy frameworks are playing significant roles But risks are elevated Sub-Saharan Africa: Growth Prospects,

The external environment – The euro-zone crisis – The US fiscal cliff – Other risks (e.g. commodity price shocks) Domestic risks – Policy slippages – Deteriorating security conditions/instability – Climate shocks 10 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012

11 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 Assumptions : Policies deployed in the euro zone fail to calm markets Global output lower than the baseline by about 2 percentage points in 2013 Commodity prices decline by between 8 (non-oil) and 17 (oil) percent. Impact: SSA’s growth reduced by 1 to 1.2 percentage points Sub-Saharan Africa: Real GDP growth in downside scenario 1,

Context: 1. The global outlook is uncertain, with large downside risks 2.Many countries face constraints on “policy space”: – a) limited room to finance any further increase in fiscal deficits AND/OR – b) limited foreign reserves to manage exchange rates and maintain confidence in the domestic currency AND/OR – c) limited room to cut interest rates without stimulating inflation and/or exchange market pressures. 12 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012

13 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October Countries experiencing strong growth and favorable export prices should move to strengthen fiscal positions. 2.Accommodative fiscal policy is warranted in middle- income countries where growth is weak – but the margin for maneuver is narrowing as debt levels rise. 3.Most low-income countries and fragile states need to strengthen domestic revenue bases, given investment needs and risks to aid flows. 4.Monetary policies appear to be appropriately calibrated in most countries that have monetary autonomy, but there is little room for easing in cases where inflation is still high.

14 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012 No one-size-fits-all, but 1.Avoid pro-cyclical fiscal tightening, where feasible: – countries that can finance larger deficits should let automatic stabilizers work. – resource exporters with ample foreign reserves can deploy this buffer to offset oil revenue losses, up to a point. – countries with limited borrowing space and foreign reserves will likely need to seek official external financing. 2.Countries with flexible exchange rates should let the rate adjust as a shock absorber. 3.Central banks with monetary autonomy and anti-inflation credibility can shift emphasis to supporting activity.

Thank You 15 International Monetary Fund, Regional Economic Outlook for sub-Saharan Africa, October 2012