Growth weakened markedly in Sub-Saharan Africa in 2015, to 3½ percent—the lowest level in 15 years. The slowdown should continue into 2016, with growth projected at 3 percent—roughly half the rate Africa has grown accustomed to....IMF

Strathmore University, Nairobi, Kenya, May 9, 2016

The Challenges of Sustaining Africa’s Growth MomentumSpeech by David Lipton First Deputy Managing Director, IMF
                           

I would like to thank the Strathmore University for agreeing to host my lecture on the regional economic outlook for sub-Saharan Africa. I would also like to thank Dr. George Njenga, the Dean of the Strathmore Business School, for hosting the event. I greatly appreciate the opportunity for sharing my views and analysis on prospects for the region with students, faculty, and professional economists.

Africa has just experienced a 15-year period of remarkable growth and development. These considerable economic achievements have helped to transform the world’s view of this region, and have given new hope for the future. However, in the past year we have seen the outlook darken for some countries as external developments affect many of the drivers of Africa’s recent economic success.

What I would like to do today is talk about these recent developments—starting with the significant gains since the mid-1990s and then outlining the reasons behind the recent slowdown. Finally, I will highlight how Africa can continue to grow with sound economic policies that can ensure favorable medium-term prospects.

My message is simple: Sub-Saharan Africa has come a long way in a short time, and there is every reason to believe that it can continue growing and developing with the appropriate policy response.

Africa Resurgent

Let’s begin with the period that became known as Africa Rising. After 1995, this region has experienced strong growth and an impressive improvement in social and human development indicators. More than two-thirds of the region’s 45 countries enjoyed ten or more years of uninterrupted growth. Millions of Africans have benefited. The achievements included more educated populations and sharp declines in infant mortality. In Kenya, for example, enrollment in primary schools increased by 25 percentage points and mortality for children under 5 years old declined by 6 ½ percentage points.

Africa’s trade also grew rapidly. This occurred largely in response to demand from emerging market countries that overtook the advanced economies as Africa’s main trading partners, particularly China.

Africa became an important destination for capital flows from both advanced and emerging market countries. Frontier market economies, such as Kenya, Senegal, and Zambia, issued Eurobonds and became more closely integrated into global financial markets.

This remarkable improvement in economic and social indicators occurred thanks to three driving forces:

(i) improvements in governance that produced a business and macroeconomic environment more conducive to investment,

(ii) higher commodity prices that benefited the exporters of natural resources, especially the region’s eight oil exporters, and

(iii) accommodative global financial conditions, which boosted capital flows and allowed countries like the ones I just mentioned to tap international markets at affordable terms.

Rough Patch

Since you are studying business and economics, I am sure you are well aware how the external environment has become much less supportive in the past year. At the global level, 2016 is going to be marked again by subdued growth, forecast to reach 3.2 percent, barely more than the 3.1 percent recorded last year. This forecast is underpinned by important macroeconomic realignments underway, including: (i) China’s slowdown and rebalancing; (ii) a further decline in commodity prices, especially oil; (iii) a related slowdown in investment and trade; and (iv) declining capital flows to emerging market and developing economies.

Sub-Saharan Africa is particularly feeling the effects of lower commodity prices and the less affordable financing terms. The result is that the strong growth of recent years has decelerated rapidly.

Growth weakened markedly in Sub-Saharan Africa in 2015, to 3½ percent—the lowest level in 15 years. The slowdown should continue into 2016, with growth projected at 3 percent—roughly half the rate Africa has grown accustomed to.

Read here full Speech

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