IMF predicts dual growth for Nigeria, S’Africa amid rising uncertainty

…Says AfCFTA will deeper trade integration

Mathew Dadiya, Abuja

The International Monetary Fund (IMF) has predicted that the two major economies in Africa – Nigeria and South would have a duality in growth performance and prospects in 2019 amid elevated uncertainty within the Sub-Saharan region.

Aggregate growth is set to pick up from 3 per cent in 2018 to 3.5 per cent in 2019 and stabilize at slightly below 4 per cent over the medium-term – or about 5 per cent, the IMF said.

The Fund disclosed this on Tuesday during its Regional Economic Outlook for Sub-Saharan Africa in Abuja, tagged, “Recovery Amid Elevated Uncertainty.”

But the 4 and 5 per cent growth, the IMF explained, excluded the two major economies, Nigeria and South Africa.

About half of the region’s countries, mostly non-resource-intensive is expected to grow at 5 per cent or more, and see a faster rise in income per capita than the rest of the world on average over the medium term, the IMF said.

According to the Fund, it is important for the policy uncertainties that are holding back growth to be addressed for the lion’s share of sub-Saharan Africans to enjoy improved standards of living.

The Fund further stated that external and domestic headwinds are weighing on growth prospects.

It observed that global expansion is losing momentum, including in key trading partners such as China and the euro area; trade tensions remain elevated; global financial conditions are volatile and have tightened somewhat relative to October 2018.

The IMF said that and commodity prices are expected to remain low.

On the domestic front, climate shocks are likely to impact agricultural output in southern Africa, while policy uncertainty is weighing on growth prospects in several countries, the IMF warned.

According to the IMF, debt vulnerabilities remain elevated in some countries.

It also observed that weaknesses in public balance sheets are also weighing on countries’ external positions, with reserve buffers below levels typically considered adequate in more than half of the countries in the region.

The IMF further noted that high nonperforming loans continue to put a strain on financial systems, while weaknesses in public financial management systems are manifesting themselves in large domestic arrears with potential effects on growth and domestic financial systems.

“The familiar challenge of finding ways to address human and physical capital investment needs are being complicated by declining fiscal space and a less supportive external environment.

“Central to resolving this challenge is building fiscal space, enhancing resilience to shocks, and fostering an environment conducive to sustained, high and inclusive growth.

“Meeting this challenge would be even more difficult if the downside risks to growth materialize (for example, if global growth is even weaker than envisioned in the current baseline).

“This underscores the need to accelerate reforms and calibrate the size and pace of policy adjustments to ensure that any shift in policies are consistent with credible medium-term macroeconomic objectives, available financing, and debt sustainability”, the IMF said.

On African Continental Free Trade Area, (AfCFTA), the Fund called for the implementation of the Agreement noting that it will enhance the contestability of markets and create an environment that fosters a dynamic private sector

and address salient constraints to business operations and deeper trade integration by improving access to and the provision of financial services and basic services including health and education.