IMF Cuts Africa Growth Forecast Because of Ebola Virus

By David Malingha Doya for Bloomberg

The International Monetary Fund reduced its growth forecast in sub-Saharan Africa because of the outbreak of the Ebola virus in West Africa and violence in at least five other countries.

Africa’s economy will expand 5 percent this year, about the same as in 2013, driven by infrastructure investment, a buoyant services sector and strong agriculture production, the IMF said today in an e-mailed statement. In April, the Washington-based fund forecast a 5.5 percent growth rate this year.

While low-income countries will spur expansion with growth of as much as 7 percent in 2014-2015, Antoinette Sayeh, director of the IMF’s Africa Department, said in a statement. Ebola has killed more than 4,500 people in Guinea, Liberia and Sierra Leone since the outbreak of the virus in December.

“The Ebola outbreak could have much larger regional spillovers, especially if it is more protracted or spreads to other countries, with trade, tourism, and investment confidence severely affected,” according to the IMF. “In Ebola-affected countries, fiscal accounts are likely to deteriorate, and, where public debt is manageable, fiscal deficits should be allowed to widen temporarily.”

Worsening insecurity stemming from civil wars and Islamist militant attacks could also curb Africa’s economic growth, according to the IMF.

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Beyond Africa rising: Future of global economy’s ‘last frontier’

Gradually but surely, however, Africa is increasingly viewed less as a “hopeless” continent and more as one with promise for economic development, less as a haven of poverty, war and natural disaster and more as a continent that offers economic opportunity. In short, Africa is seen more as a “normal”, even if less prosperous place than many other parts of the world, than as the decidedly “abnormal” place off the map of the mental imagination that it once was.

  This recent emergence and the positive evolution of the continent’s image has led to the growth of an “Africa-Rising” industry of analysts, commentators, scholars and business executives in which the continent is seen as the next big thing in the world’s economy.

  The continent in this view can lay claim to a looming African century close on the heels of the economic rise of Asia in the 20th and 21st centuries.

  Three main factors have shaped this trend. First, many of the wars for which Africa was famous have ended. The wars in Sierra Leone and Liberia, the Great Lakes region of Africa including Rwanda and the Democratic Republic of Congo, and the long armed conflicts in the Horn of Africa in Ethiopia, Eritrea and Sudan were and are only a few of the destructive orgies of annihilation of human capital, political stability and economic possibilities that shaped perceptions of Africa as a war zone writ large in the 1980s, the 1990s and the 2000s.

  As most of these conflicts have ended, more recent ones have raged in Mali and the Central African Republic, keeping the world’s peacekeeping armies in business. But the continent is far more at peace now than it once was, clearing the path for a shift in attention to democratization and economic development.

  Second, macroeconomic stability has been broadly established across the continent in the past decade. Inflation is down, at an average of 10 per cent in sub-Saharan Africa compared to the nearly 25 per cent in the 1980s and the 1990s. This trend can be traced to the evolution of better monetary policy by increasingly independent central banks, as well as improved fiscal management.

  At the same time, GDP growth has continued apace. Average GDP growth in sub-Saharan Africa in the decade leading to 2013 was 5 per cent, with a third of Africa’s countries reaching growth rates of 6 per cent and others, such as Nigeria, growing at average rates of seven per cent.

  According to the African Development Bank, Africa’s economies are growing faster than those of any other continent. Nearly half of Africa’s countries are now classified as middle income countries, the numbers of Africans living below the poverty line fell to 39 per cent in 2012 as compared to 51 per cent in 2005, and around 350 million of Africa’s one billion people are now earning between $2 and $20 a day.

  The third factor is the global financial crisis and the subsequent recession in the Eurozone and other Western economies at a time in which African economies were growing rapidly.

  This has led to opportunistic focus on Africa by several multinationals and global investment funds as the “final frontier” for wealth creation, with returns on investment that can only be the stuff of dreams in the world’s industrialized countries.

  But the reality is more nuanced. Contrary to the breathless prognostications of enthusiasts, while Africa has become an economic opportunity in the world economy, the continent is yet to fully emerge, let alone rise, as an economic presence and a co-creator of global prosperity.

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