IMF expects better outlook for SA and Nigeria will lift region
The IMF is expecting that an improved outlook for SA and Nigeria, Africa’s two biggest economies, will bolster sub-Saharan Africa’s recovery.
This despite a weak start to the year in SA that included a contraction in the first quarter and fears from analysts that the country was headed for its first recession since the 2007-08 financial crisis.
The rise in commodity prices coupled with improved prospects in Nigeria and SA will support recovery in the region.
Growth in sub-Saharan Africa is expected to increase from 2.8% in 2017 to 3.4% in 2018, rising further to 3.8% in 2019 while the IMF’s growth expectations for SA have remained unchanged at 1.5% in 2018 and 1.7% in 2019. “The economy is expected to recover somewhat over the remainder of 2018 and into 2019 as confidence improvements associated with the new leadership are gradually reflected in strengthening private investment,” reads the IMF’s June World Economic Outlook released on Monday.
This comes as President Cyril Ramaphosa has secured $20bn in investment from the Gulf as part of his $100bn investment drive over the next five years. Saudi Arabia and the United Arab Emirates committed at the weekend to investing $10bn each in SA, said the Presidency.
But some economists have begun revising down their forecasts after the release of first-quarter figures. This was compounded by a slew of weak numbers in the second quarter.
Absa senior economist Peter Worthington warned on Monday: “Growth prospects [in SA] seem to have slumped with fading ‘Ramaphoria’, evidenced by a large GDP contraction in the first quarter and weak activity prints so far in the second quarter.”
He said subdued business confidence and various headwinds to household spending would prevent a robust recovery unless the government swiftly implemented growth-boosting structural reforms. Absa has dropped its SA growth forecast for 2018 from 1.8% to 1.2% but has raised its forecast from 1.9% to 2% in 2019.
But growth in 2018 was still expected to be stronger than 2017, said Novare economic strategist Tumisho Grater.
“The glimmer of hope from recent surveys is that while business confidence is lower, respondents are still planning on spending their capex in the next 12 months,” she said.
But she warned that Treasury’s growth forecast of 1.5% for 2018 was slightly ambitious, with growth more likely to hover between 1.2% and 1.3%.
“Policy uncertainty remains key to stimulating the economy. If business is unsure, they won’t be keen to invest. There needs to be a return on investment.”