International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016 Weathering the Commodity Price Slump Regional Economic Outlook.

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Presentation transcript:

International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016 Weathering the Commodity Price Slump Regional Economic Outlook for Sub-Saharan Africa African Department International Monetary Fund May 3, 2016

2  Commodity Terms of Trade Cycles in SSA  Commodity Price Swings and Macroeconomic Performance  Policies to Enhance Resilience to Shocks International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016

SSA: increasing dependence on commodities 3 International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016 Sub-Saharan Africa: Net Commodity Exports to GDP

Half of the countries export extractive commodities 4 International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016 Sub-Saharan Africa: Net Commodity Exports to GDP, 2010–14 Average Energy Exporters Metal Exporters

Large price swings, large impact 5 International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016 Commodity Terms of Trade (Index, 100 = 1990–2000 average, median)

Oil exporters’ average TOT shock: 20 percent of GDP 6 International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016 Sub-Saharan Africa: Commodity Terms of trade, 2000–15 (Cumulative from 2000; percentage points of GDP) Energy ExportersMetal Exporters

7  Commodity Terms of Trade Cycles in SSA  Commodity Price Swings and Macroeconomic Performance  Policies to Enhance Resilience to Shocks International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016

Strong correlation between activity and oil prices 8 International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016 Sub-Saharan Africa: Commodity Terms of Trade and GDP Growth, 2000–11

Commodity swings and real GDP growth 9 SSA: Real GDP Growth during Commodity Price Upswings and Downswings (Three year averages) Sub-Saharan Africa Sub-Saharan Energy Exporters

Other macroeconomic variables also react strongly 10 International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016 Energy Exporters: Macroeconomic Variables during Upswings and Downswings (Three-year averages) Current Account Balance Fiscal Balance International Reserves Total Public Debt

Weak outlook for energy prices: strong headwinds 11 International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016 SSA: Effects on Energy and Metal Exporters of Commodity Terms-of-Trade Shock (Percentage points) Effect on GDP Effect on Trade-Balance-to-GDP Ratio Effect on Fiscal-Revenue-to-GDP Ratio

12  Commodity Terms of Trade Cycles in SSA  Commodity Price Swings and Macroeconomic Performance  Policies to Enhance Resilience to Shocks International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016

Exchange rate flexibility and low public debt have helped weather commodity price shocks 13 International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016 SSA: Exchange Rate Flexibility and Public Debt in Episodes of Low and High Resilience of Growth Share of Countries with a Flexible Exchange Rate Total Public Debt

Analysis of previous episodes of price downturns: 14 International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016

Urgent need for policy response 15 International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016  The exchange rate should be part of the policy response and should not be delayed  With diminishing policy space, fiscal adjustment is called for, especially in countries in a currency union, such as the CEMAC:  Revenue mobilization  Spending streamlining

Apart from immediate policies, vision for the longer term should be maintained 16 International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, April 2016  Beyond necessary short-term policy actions, the focus should turn squarely toward economic diversification  Efforts to upgrade infrastructure and skills should continue.  To unleash the potential of increased private sector economic activity, stronger efforts are needed to improve the business climate and efficiency of public spending

The online edition of the Regional Economic Outlook for sub-Saharan Africa is now available at Thank You! 17