Director of the IMF’s African Department Abebe Aemro Selassie

Africa’s Economy to Grow by 3.6% in 2022

ADDIS ABABA – The International Monetary Fund (IMF) on Friday projected Sub-Saharan Africa’s economy to grow by 3.6% in 2022 as the region’s recovery from the impacts of the Covid pandemic abruptly interrupted.

The forecasted growth rate is significantly lower than last year, the IMF said in its latest Regional Economic Outlook for region Africa.

The downturn in advanced economies and emerging markets, tighter financial conditions, and volatile commodity prices, have undermined last year’s gains.

“Late last year, sub-Saharan Africa appeared to be on a strong recovery path out of a long pandemic,” said Abebe Aemro Selassie, Director of the IMF’s African Department.

“Unfortunately, this progress has been abruptly interrupted by turmoil in global markets, placing further pressures on policymakers in the region,” Abebe pointed out.

The Outlook says the region is expected to grow by 3.6% in 2022, down from 4.7% in 2021, due to muted investment and the overall worsening of its balance of trade.

Non-resource-intensive countries, which enjoy a more diverse economic structure, will continue to be among the region’s more dynamic and resilient economies.

They will grow by 4.6% in 2022, compared to 3.3% in oil exporters and 3.1% in other resource-intensive countries.

The recent faster-than-expected increase in inflation is less striking relative to historical averages for the region.

However, the cost-of-living squeeze has pushed millions of people into acute food insecurity.

It could also weigh on economic growth and undermine social and political stability, the Fund warned.

The IMF’s outlook also said the public debt has reached about 60 percent of GDP, leaving the region with debt levels last seen in the early 2000s.

The composition of debt has shifted towards higher-cost private sources, increasing debt service costs and rollover risks.

In fact, IMF said 19 of the region’s 35 low-income countries are now in debt distress or at high risk of distress.

Against this backdrop, Abebe pointed to four priorities for policymakers in the region, urging them first to give “utmost priority” to protect the most vulnerable amid rising food insecurity.

“Second, to contend with increased inflation and tightening global interest rates, policymakers should cautiously raise policy rates, while keeping a close eye on inflation expectations and foreign exchange reserves,” Abebe said.

Third, the regional director advised policymakers to continue consolidating their public finances to preserve fiscal sustainability, particularly in the context of rising interest rates.

“Credible medium-term fiscal frameworks, including effective debt management, can help lower borrowing costs,” he added.

In countries with acute debt vulnerabilities, restructuring or reprofiling may be required, he said, suggesting the need for improved implementation of the G20 Common Framework.

“And finally, they should set the stage for high-quality growth, amid accelerating climate change,” Abebe said.