Sub-Saharan Africa’s growth rate has slowed in recent months and this owed largely to the oil price slump. Its economic outlook, though, remains favourable at an estimated 4.5 percent this year – second to only Asia. However, for any real growth to be sustained in the short-term, managing the impact of the lower oil prices has to be the priority. “That said, the economic expansion this year will be at the lower end of the range experienced in the recent years. This mainly reflects the impact of the sharp decline of the oil and commodity prices that we have witnessed over the last six months,” Antoinette Sayeh, an IMF African Department Director said last week. She revealed this during the recently concluded IMF-World Bank Spring Meetings in Washington D.C.
According to her, the oil shock would have differentiated effects on sub-Saharan Africa’s diverse economies. While oil exporters like Nigeria and Angola would be hit hard, oil importers stand to benefit from lower oil prices, although gains would be partly offset by lower prices for their non-oil commodity exports.
In addition to the oil price crash, other impediments to the economic growth of the region include the Ebola outbreak that hampered growth in East Africa and security threats in the Sahel and Kenya. An escalation of these events could pose serious fiscal risks and scare potential domestic and foreign investors.
Given these prevailing conditions, dealing with the oil shock should remain a priority for the region. “The drop in oil prices also provides a unique opportunity to advance politically difficult energy subsidy reforms across the region,” she noted.
The current commodity price shock presents the case for total economic diversification. An energetic and productive population in a diversified economy is very likely to result in significant prosperity and growth. Demographic trends are also in favour of the continent as multiple studies suggest that the number of people reaching working age in the region will exceed that of the rest of the world combined by 2030. “This offers a tremendous opportunity for sub-Saharan Africa which, if properly tapped, can be a strong engine for growth going forward”, Sayeh concluded.
By Emmanuel Iruobe