The International Monetary Fund has upgraded Sub-Saharan Africa’s GDP growth to 3.8 per cent this year, after a downward revision of 3.3 per cent last October.
Its latest January 2024 World Economic Outlook says the region’s growth is further projected to consolidate at 4.1 per cent in 2025.
This is on the back of a lull in the negative effects of earlier weather shocks, as supply issues gradually improve.
In its October 2023 revision, the lender projected the region's economy to grow at 4.0 per cent this year.
It now says the downward revision of 0.2 percentage point mainly reflects a weaker projection for South Africa on account of increasing logistical constraints, including those in the transportation sector.
Globally, the lender estimates the economy to grow at a pace of 3.1 per cent in 2024 and 3.2 per cent in 2025.
The projection is higher than the October revision, pegging it on greater-than-expected resilience in the United States and several large emerging market and developing economies, as well as fiscal support in China.
The global forecast for 2024–25 is however still below the historical (2000–19) average of 3.8 per cent, as elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt now weigh on economic activity.
“Inflation is thus falling faster than expected in most regions, amid unwinding supply-side issues and restrictive monetary policy,” the lender says.
“Global headline inflation is expected to fall to 5.8 per cent in 2024 and to 4.4 per cent in 2025, with the 2025 forecast revised down.”
IMF thus calls on policymakers to ensure successful management of the final descent of inflation to target.
This by calibrating monetary policy in response to underlying inflation dynamics and where wage and price pressures are clearly dissipating, adjusting to a less restrictive stance.
At the same time it notes that in many cases, with inflation declining and economies better able to absorb effects of fiscal tightening, a renewed focus on fiscal consolidation to rebuild budgetary capacity to deal with future shocks, raise revenue for new spending priorities, and curb the rise of public debt is needed.
It notes that targeted and carefully sequenced structural reforms would reinforce productivity growth and debt sustainability and accelerate convergence towards higher income levels.