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IMF urges resource dependent African economies to diversify to boost
growth
KAMPALA, May 25, 2019 (BSS/Xinhua) – Resource-dependent African economies
must diversify if they are to rev up economic growth, the International
Monetary Fund (IMF) has said in a new report.
The IMF Regional Economic Outlook for Sub Saharan Africa launched here
earlier this week by Mira Clara, the organization’s resident representative
showed that although the continent’s economic growth is on an upward
trajectory, it varies considerably among countries.
It showed that recent and prospective growth performance is split between
resource and non-resource-intensive countries.
The more diversified economies, 21 out of 45 economies, continue to grow
at over 5 percent while growth remains anemic in more resource-dependent
economies, which are home to more than half the population in sub-Saharan
Africa.
Growth in resource-intensive countries was adversely impacted by the large
2014 terms-of-trade shock, which led to fall in commodity prices.
The region’s larger economies also registered slower growth, according to
the Outlook. In South Africa, lower private investment is contributing to
slower growth with GDP growth expected to reach only 1.2 percent in 2019
while in Nigeria, the drop in oil prices and ongoing adjustment are expected
to slow growth to 2.1 percent. In oil rich Angola, growth is projected at 0.4
percent in 2019.
Clara said African governments can take up several policy recommendations
like facilitating greater private investments, raising productivity including
promoting diversification and export competitiveness. Governments can also
reduce non-tariff barriers and promote intra-regional trade.
Louis Kasekende, deputy governor of Uganda’s central bank, Bank of Uganda
said the Outlook presents both the good and bad sides.
He said the report, on a positive note shows there are African countries
on a recovery path with rising income per capita. Some of these countries are
resource-rich while the majority are resource-poor countries.
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“Growth is strong in non-resource intensive countries. This means these
countries have found other anchors for growth beyond mineral resources. Also
fiscal policies have been supportive of growth and stability especially in
resource-poor countries,” Kasekende said.
“We need fiscal policy to remain prudent otherwise we risk reversing all
the gains made. In addition, we have reduced conflicts in the region,
providing a conducive environment for trade and other economic activities.
Peace and stability must be preserved at all times and perhaps at all costs.”
Kasekende said.
On the flipside, Kasekende said Africa is still challenged by
diversification and dependence on primary commodities that are subject to
high volatility in prices.
“This is an indication that we have failed to get a very good anchor for
sustainable high growth rates and there is minimal structural transformation,
the sort of change that underpinned the development of the Asian Tigers,”
Kasekende said.
He said large economies like Angola, Nigeria and South Africa are expected
to be more sophisticated and growth-supportive of their relatively smaller
neighbors.
“If the large entities that are expected to anchor regional trade aren’t
faring well, then the benefits of regional integration may be severely
impacted.” he said.
He said what is worrying is that the recovery looks marginal and the job
creation is weak, meaning there is a substantial threat to stability. The
risk to civil strife within countries is high, he noted.
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