IMF: Sub-Saharan Africa to grow 3.6% in 2024, 4.2% in 2025

The International Monetary Fund (IMF) has projected a 3.6 per cent regional growth for Sub-Saharan Africa in 2024. This growth is expected to increase to 4.2 per cent in 2025, showing improvement compared to recent years. However, policymakers in the region face three main hurdles, namely subdued growth, tight financing conditions, and social unrest. The IMF also anticipates a substantial decline in headline inflation from 18.1 per cent in 2024 to 12.3 per cent in 2025, with notable decreases expected in countries such as Angola, Ghana, and Nigeria. Abebe Selassie, the Director of the African Department at the IMF, shared insights on the regional outlook for the year in an interview with CNBC Africa. The 3.6 per cent growth forecast for Sub-Saharan Africa is a positive development, although still below the region's historical growth rates of 7-8 per cent seen before 2016-17. Selassie highlighted that despite the overall growth figure, there is significant variation within the region, with nine out of the 20 fastest-growing economies globally coming from Sub-Saharan Africa. Countries like Rwanda and Côte d'Ivoire, with more diversified economic structures, are leading in growth. However, policymakers are faced with the challenge of reducing macroeconomic imbalances, navigating difficult financing conditions, and strengthening governance to implement necessary reforms. Selassie emphasized the importance of managing debt levels while addressing the need for additional borrowing in the region. He acknowledged that debt has risen due to essential investments in various sectors like health, education, and infrastructure. To balance the debt requirements, countries must focus on generating more tax revenues by improving their tax systems' efficiency and equity. Additionally, he stressed the significance of containing fiscal deficits to stabilize debt levels during challenging financial periods. The IMF's projection of declining inflation rates in the region from 18.1 per cent to 12.3 per cent by 2025 was attributed to central banks' proactive tightening of policies and decreasing commodity prices globally. However, Selassie pointed out that food price increases have caused significant strain, especially in countries where food comprises a substantial portion of household consumption. High inflation rates have contributed to social unrest and dissatisfaction among the population, reflecting the need for continued focus on price stability and income growth. The IMF report also highlighted the urgency for Sub-Saharan Africa to address its growing labor market demands. With one in every two new entrants into the global labor force expected to come from the region by 2030-2035, policymakers face the challenge of creating jobs for the expanding population. Selassie emphasized the importance of investing in education, improving the quality of education, and implementing reforms to facilitate private sector job creation. The demographic transition unfolding in the region underscores the critical need for strategic planning and support for policy makers to navigate the impending labor force dynamics. In conclusion, Selassie underscored the need for robust policy responses to address the challenges faced by Sub-Saharan Africa. The region's economic growth prospects, while showing improvement, require sustained reforms, effective debt management, inflation control measures, and strategic interventions in the labor market to capitalize on the demographic dividend. As Sub-Saharan Africa navigates through a pivotal phase of development, collaborative efforts from governments, international stakeholders, and the private sector will be vital in driving sustainable growth and prosperity across the region.