afrol News, 10 October - Current global turbulences are increasing Africa's risk of decline in resource flows, both in private capital, remittances as well as aid, IMF has said in a report.

Report notes that even though main effects of global financial turmoil appear to be indirect, in form of slower global growth and volatile commodity prices, more risks could yet unflold.

"The resilience of growth and macroeconomic stability in the continent is being put to a test," Antoinette Sayeh, Director of IMF's African Department told press, adding, "Countries need - more than ever - to be able to respond quickly to unexpected exogenous shocks. In these circumstances, maintaining, if not increasing, aid remains of paramount importance."

Growth in sub-Saharan Africa is projected to ease, reflecting increases in food and fuel prices, slower world growth, and global financial turmoil, according to IMF's latest regional forecast.

Continent's growth is projected to slow slightly to about 6 percent in 2008 and 2009, down from 6½ percent in 2007, while inflation is set to rise to an average 12 percent, says IMF's Regional Economic Outlook for Sub-Saharan Africa (REO), released today.

Report further said although GDP growth has tapered off somewhat in sub-Saharan African countries, at slightly less than 6 percent, the growth rate for 2008 is still expected to be relatively strong, continuing the healthy growth trend of previous years.

It however added that in oil exporters, growth is expected to fall temporarily by half a percentage point, to 8 percent in 2008, reflecting mainly lower-than-expected oil output in Niger Delta due to recurring violence, slightly lower-than-expected production in Equatorial Guinea's maturing main oil field; and weaker non-oil growth in Chad. In oil importers, growth is also projected to decelerate, by half a percentage point, to 5 percent, report added.

IMF report further says food and fuel price shock has put upward pressure on inflation and current account deficits, also adding that increase in inflation cuts across countries with different exchange rate regimes and different economic structures and levels of development. Sub-Saharan Africa's inflation in 2008 is projected to climb to 12 percent - a noticeably larger increase than in advanced countries, said IMF.

It continued that despite recent price declines, food and fuel prices are projected to remain substantially above their 2007 levels, recording that although some sub-Saharan African countries have benefited from rising prices on their exports of non-oil commodities (such as aluminum, cotton, and gold), most African oil-importing countries are expected to see a significant and lasting decline in their terms of trade relative to 2007.

"The most pressing challenge for policymakers is to adjust to food and fuel price shock, preserve macroeconomic stability, and shield the poor," said IMF in a statement further concluding that, food and fuel price increases could lead to a substantial increase in poverty rates in a number of countries.

"Risks to outlook for 2009 from global environment have increased and are tilted to the downside. One important risk is that the global financial market turbulence could slow global growth by more or for longer than expected, which would likely reduce demand for Africa's exports and depress its terms of trade," said IMF's report.

To sustain growth and keep inflation in check, IMF empahsised countries' need to be prepared to respond to sudden changes in global economic conditions, particularly in commodity prices. They may also need to consider building over time an additional cushion in external reserves to better withstand exogenous shocks, fund's report said.

It concluded that in addition to risks stemming from unforeseen developments in the global environment, there are also domestic risks, pinpointing that main domestic risk is that policies could fail to preserve growth and reform momentum of recent years, either by not providing enough cushioning for the poor or by failing to preserve sufficient macroeconomic stability. "This risk appears particularly acute in several hard-hit low-income oil importers, but other countries do not seem immune," reported concluded.

By staff writer

© afrol News

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