"Growth in Sub-Saharan Africa is Diverging"

" Growth in Sub-Saharan Africa is Diverging \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n Sub-Saharan Africa is home to nine of the world\u2019s top twenty fastest-growing economies this year. Such startling statistics, however, rarely feature in discussions of the region\u2019s outlook. Instead, headline figures typically emphasize the relatively modest average economic performance. This disconnect reflects a two-track growth pattern, where a significant part of the region underperforms. Our analytical note for the latest\u00a0<a href=\"https:\/\/links-1.govdelivery.com\/CL0\/https:%2F%2Fwww.imf.org%2Fen%2FPublications%2FREO%2FSSA%2FIssues%2F2024%2F10%2F25%2Fregional-economic-outlook-for-sub-saharan-africa-october-2024%3Futm_medium=email%26utm_source=govdelivery\/1\/010001932997c808-66adcdaa-aecb-4cd2-87fd-54460ee7e48a-000000\/xNog5uZaw8M6y4W3KFy8sNq-h4icBSZp7z4X6UTmaHg=379\" target=\"_blank\" rel=\"noopener\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/links-1.govdelivery.com\/CL0\/https:%252F%252Fwww.imf.org%252Fen%252FPublications%252FREO%252FSSA%252FIssues%252F2024%252F10%252F25%252Fregional-economic-outlook-for-sub-saharan-africa-october-2024%253Futm_medium%3Demail%2526utm_source%3Dgovdelivery\/1\/010001932997c808-66adcdaa-aecb-4cd2-87fd-54460ee7e48a-000000\/xNog5uZaw8M6y4W3KFy8sNq-h4icBSZp7z4X6UTmaHg%3D379&source=gmail&ust=1731730062408000&usg=AOvVaw2l45jbR4grlNqb0hJ2hqbu\"> Regional Economic Outlook for sub-Saharan Africa \u00a0takes a closer look at this issue. \r\n Over the past ten years, growth in sub-Saharan Africa\u2019s resource-intensive countries (RICs)\u2014and especially in fuel exporting economies such as Angola, Chad, and Nigeria\u2014has slowed down sharply, falling far below growth in non-RICs (such as Ethiopia, Rwanda, and Senegal). Indeed, incomes in RICs have essentially stagnated. This marks a sharp contrast with the decade leading up to 2014, when RICs experienced rapid growth, in line with the region\u2019s strong overall performance. \r\n The post\u20132014 divergence between RICs and non-RICs has been driven largely by the combination of two factors. \r\n\r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n<a href=\"https:\/\/links-1.govdelivery.com\/CL0\/https:%2F%2Fwww.imf.org%2Fen%2FNews%2FArticles%2F2024%2F11%2F14%2Fcf-growth-in-sub-saharan-africa-is-diverging%3Futm_medium=email%26utm_source=govdelivery\/3\/010001932997c808-66adcdaa-aecb-4cd2-87fd-54460ee7e48a-000000\/22UULJFbUUm4BBl1MBc_LSjVTXKkdo28nRzluSqn8HE=379\" target=\"_blank\" rel=\"noopener noreferrer\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/links-1.govdelivery.com\/CL0\/https:%252F%252Fwww.imf.org%252Fen%252FNews%252FArticles%252F2024%252F11%252F14%252Fcf-growth-in-sub-saharan-africa-is-diverging%253Futm_medium%3Demail%2526utm_source%3Dgovdelivery\/3\/010001932997c808-66adcdaa-aecb-4cd2-87fd-54460ee7e48a-000000\/22UULJFbUUm4BBl1MBc_LSjVTXKkdo28nRzluSqn8HE%3D379&source=gmail&ust=1731730062408000&usg=AOvVaw3WkEvl_QIW16t4tNVEWzxp\"><img class=\"CToWUd\" src=\"https:\/\/ci3.googleusercontent.com\/meips\/ADKq_NYF2ss734zX6IhdPG2279TmGWNwH7m6L2-LfTZ3t0O56V1p3fZkOoYbKav38ykbRFzy86qucspAPYhJdbI0RDsoQJCPpjWZggDMqJG3n99ud5Z-tj7bXZ3dQIxVXA3FXZCl6turOWxaLVVqDMJ8IUKCiihs1-nsmMSGTareGDBZMujXz5m0g7788f3a8t_Q2wco-w=s0-d-e1-ft#https:\/\/content.govdelivery.com\/attachments\/fancy_images\/USIMF\/2024\/11\/10523118\/cf-afr-growth-divergence-chart-1_original.png\" alt=\"chart showing GDP per capita growth across sub-Saharan's economies\" width=\"538\" height=\"538\" data-bit=\"iit\" \/> \r\n First, RICs and especially fuel exporters experienced a dramatic decline in their commodity export prices around 2014\u201315, as the commodity \u201csuper-cycle\u201d\u2014a period of sharply rising commodity prices\u2014came to an end. Since then, the terms-of-trade decline has only been partially reversed. \r\n Second, and critically, the impact of the terms-of-trade shock on RICs was exacerbated by pre-existing structural vulnerabilities, including a poor business environment, limited human capital, weak governance, and poor management of resource revenues. \r\n Structural Weaknesses \r\n Weak governance, systemic corruption, and an unfavorable business climate take a toll on productivity and output\u2014and the effects are most striking when commodity prices fall. Such weaknesses affect both the resource sector itself and prospects for the economy diversifying into other sectors. For instance, the potential for theft of oil production undermines productive efficiency and diverts precious resources from more productive uses. Or weak governance can be a central impediment for private sector investment more broadly. Fuel exporters outside the region, with generally stronger governance, have weathered the commodity price slump far better. \r\n IMF staff analysis confirms that terms-of-trade shocks have a stronger and longer-lasting impact on growth in countries with weak governance. We estimate that for every one-percent worsening in a country\u2019s terms of trade, medium-term growth is around \u00bc percentage point higher in countries with smaller governance challenges. \r\n<a href=\"https:\/\/links-1.govdelivery.com\/CL0\/https:%2F%2Fwww.imf.org%2Fen%2FNews%2FArticles%2F2024%2F11%2F14%2Fcf-growth-in-sub-saharan-africa-is-diverging%3Futm_medium=email%26utm_source=govdelivery\/4\/010001932997c808-66adcdaa-aecb-4cd2-87fd-54460ee7e48a-000000\/IwK0JPiDKuKoQgAJRvzYkSF8WB5niJBI7SQMYDWVvhk=379\" target=\"_blank\" rel=\"noopener noreferrer\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/links-1.govdelivery.com\/CL0\/https:%252F%252Fwww.imf.org%252Fen%252FNews%252FArticles%252F2024%252F11%252F14%252Fcf-growth-in-sub-saharan-africa-is-diverging%253Futm_medium%3Demail%2526utm_source%3Dgovdelivery\/4\/010001932997c808-66adcdaa-aecb-4cd2-87fd-54460ee7e48a-000000\/IwK0JPiDKuKoQgAJRvzYkSF8WB5niJBI7SQMYDWVvhk%3D379&source=gmail&ust=1731730062408000&usg=AOvVaw2o-mbzX2OT-0G5SwhKvl8C\"><img class=\"CToWUd\" src=\"https:\/\/ci3.googleusercontent.com\/meips\/ADKq_NbL2D8naiSsraGTlqDcV8bgskwpK-bNaODJgPHYUGaYwmpOdW7PvLGfuo7HjBay0PnY4Bn55g_Auc-g2XL3c0PE-XZshBcSZ-NqI11DjB9AywToyv_HGfAEXrV2mrcInQ0ixWHY1MdXHRU_nyWF-TlhPJ5g0hP9_efGcdtJFYKiDaK_XrO1DeeLLAQr1IBw4ZKz1A=s0-d-e1-ft#https:\/\/content.govdelivery.com\/attachments\/fancy_images\/USIMF\/2024\/11\/10523123\/cf-afr-growth-divergence-chart-2_original.png\" alt=\"chart showing gross domestic product per capita for sub-Saharan African countries with above- and below-average governance scores\" width=\"538\" height=\"538\" data-bit=\"iit\" \/> \r\n In addition, poor resource management reinforced the original shock through a pro-cyclical fiscal bias. Fiscal policy in RICs, including in sub-Saharan Africa, is generally far more correlated with economic shocks, intensifying their effects, compared to other countries. For instance, when commodity prices are high, many RICs, particularly fuel exporters, have embarked on costly capital projects that are often poorly planned and implemented, with corresponding sharp reductions in capital spending when commodity prices fall. In addition, many fuel exporters also provide sizable fuel subsidies, the cost of which increases as oil prices rise, limiting their ability to save during booms, while crowding out growth-friendly development spending. The average oil-exporting country in sub-Saharan Africa has since 2011 consistently spent all its oil revenues in the year when they accrued. \r\n The Way Forward \r\n Reversing this growth divergence is a regional priority, as RICs make up about two-thirds of sub-Saharan Africa\u2019s GDP and population. It is also a humanitarian priority. Poor growth performance has translated into poor development outcomes\u2014progress in tackling poverty in RICs effectively halted in 2014. Compared to children in other parts of the region, a child born in a RIC today is expected to live 4 years less on average, and is 25 percent more likely to live in poverty. \r\n Reigniting durable growth will require a stable macroeconomic environment. More prudent and consistently implemented fiscal frameworks can help address poor resource management challenges\u2014and also help ensure growth is more resilient going forward. Further, broad-based reforms to address structural weaknesses\u2014strengthening governance, enhancing the business environment, accumulating human capital, and addressing infrastructure bottlenecks\u2014can help countries diversify and grow. And for fuel exporters, facing the global green-energy transition, the need to diversify is ever more urgent. "

"Growth in Sub-Saharan Africa is Diverging"

Gold Boom Drives Rising Costs for Australian ProducersAMP

Nigerian Stock Market Creates Largest Pool of Billion-Dollar Stocks in 2025AMP

Africa Private Investment Nearly Doubles to $3bn on Mega DealsAMP

Sinner Dominates Tien to Secure China Open TitleAMP

President Mahama Vows Tougher Action on Cybercrime, Promises Collaboration with Global PartnersAMP

Government to Establish Cyber Security Fund to Bolster Digital DefencesAMP

Headline Inflation Hits Single-Digit With 9.4% Rate in September 2025AMP

Bank of Ghana Prices 1oz Gold Coin at GHS 49,131.99AMP

Ghana Hosts IGAD Delegation on Land Governance ExchangeAMP

EIA Rattles Oil Markets With Reports of Crude Oil, Product BuildsAMP

Dams for Development? Unpacking Tensions in the World Bank’s Hydropower PoliciesAMP

Chart of the Week: Dollar’s Share of Reserves Held Steady in Second Quarter When Adjusted for FX MovesAMP

Sinner Dominates Tien to Secure China Open TitleAMP

President Mahama Vows Tougher Action on Cybercrime, Promises Collaboration with Global PartnersAMP