World Economic and Financial Surveys

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World Economic and Financial Surveys


International Monetary Fund


©2018 International Monetary Fund

Cataloging-in-Publication Data

Names: International Monetary Fund.

Title: Regional economic outlook. Sub-Saharan Africa : capital flows and the future of work.

Other titles: Sub-Saharan Africa : capital flows and the future of work. | World economic and financial surveys.

Description: Washington, DC : International Monetary Fund, 2018 | Oct. 18. | Includes bibliographical references.

Identifiers: ISBN 978-1-48437-539-6 (paper)

ISBN: 978-1-48437-776-5 (Web PDF)

Subjects: LCSH: Africa, Sub-Saharan—Economic conditions. | Economic development—Africa, Sub-Saharan. | Capital movements—Africa, Sub-Saharan.

Classification: LCC HC800 .R4 2018

The Regional Economic Outlook: Sub-Saharan Africa is published twice a year, in the spring and fall, to review developments in sub-Saharan Africa. Both projections and policy considerations are those of the IMF staff and do not necessarily represent the views of the IMF, its Executive Board, or IMF Management.

Publication orders may be placed online, by fax, or through the mail:

International Monetary Fund, Publication Services

P.O. Box 92780, Washington, DC 20090 (U.S.A.)

Tel.: (202) 623-7430 Fax: (202) 623-7201

E-mail : publications@imf.org




  • Abbreviations

  • Acknowledgments

  • Executive Summary

  • 1. Recovery and Rising Risks

    • Macroeconomic Developments and Prospects

    • Balance Sheet Vulnerabilities Remain Elevated

    • Risks to the Outlook

    • Policies

    • References

  • 2. Capital Flows to Sub-Saharan Africa: Causes and Consequences

    • Evolution of Capital Flows

    • Drivers of Capital Flows

    • Macroeconomic Consequences of Capital Inflows

    • Conclusion

    • References

  • 3. The Future of Work in Sub-Saharan Africa

    • The Impact of Technological Change: Will Machines Replace Workers?

    • Scenario Analysis: Exploring the Future of Work in Sub-Saharan Africa

    • What Policies are Needed to Create Future-Proof Jobs?

    • Conclusion

    • References

  • Statistical Appendix

  • Boxes

  • 1.1. The Re-Emergence of Fuel (Energy) Subsidies in Sub-Saharan Africa

  • 1.2. Market Developments in Sub-Saharan African Frontier Economies in Periods of Financial Volatility

  • 1.3. Progress Toward the Sustainable Development Goals

  • 3.1. Scenario 1: Africa Arisen

  • 3.2. Scenario 2: Africa for Africa

  • 3.3. Scenario 3: Africa Adrift

  • Table

  • 2.1. Volatility of Financial Flows

  • Figures

  • Chapter 1

  • 1.1. Global Growth Projections: Current versus April 2018

  • 1.2 Selected Commodity Prices: Expected Changes Average 2019–20 versus 2017

  • 1.3 Sub-Saharan African Frontier Market Economies: International Sovereign Bond Issuances, 2011–18

  • 1.4 Sub-Saharan Africa: Real GDP Growth, 2013–22

  • 1.5 Sub-Saharan Africa: Change in Employment

  • 1.6 Sub-Saharan Africa: Reserve Buffers

  • 1.7 Sub-Saharan Africa: Overall Fiscal Balance, 2017–18

  • 1.8 Sub-Saharan Africa: Medium-Term Fiscal Plans, 2018–23

  • 1.9 Sub-Saharan Africa: Gasoline Prices, April/May 2018

  • 1.10 Sub-Saharan Africa: Debt Risk Status for PRGT Eligible Low-Income Developing Countries, 2008–17

  • 1.11 Sub-Saharan African Countries at High Risk or in Debt Distress: Cumulative Contribution from Debt Decomposition, 2013–17

  • 1.12 Sub-Saharan Africa: Average Fiscal Balance and Public Sector Debt, 2013–18

  • 1.13 Sub-Saharan Africa: Public Sector Debt by Currency, 2011–17

  • 1.14 Sub-Saharan Africa: Bank Nonperforming Loans to Total Loans

  • 1.15 Sub-Saharan Africa: Private Sector Credit Growth

  • 1.16 Sub-Saharan Africa: Banks’ Holdings of Government Debt

  • 1.17 Sub-Saharan Africa: Average Potential Impact on GDP of Trade Measures

  • 1.18 Sub-Saharan African Frontier and Emerging Market Spreads, 2014–18

  • 1.19 Sub-Saharan African Frontier Markets: Maturity of International Sovereign Bonds

  • 1.20 Sub-Saharan Africa: Public Sector Debt to GDP, 2011–23

  • 1.21 Sub-Saharan Africa: Internally Displaced Persons, 2010–17

  • 1.22 Sub-Saharan Africa: Contribution to Current Account Adjustment, 2014–17

  • 1.23 Deviation from Current Account Norm, 2018

  • 1.24 Contribution of Oil Price Shock to Output Volatility by Economic Classification

  • 1.25 Contribution of Oil Price Shock to Output Volatility by Degree of Diversification

  • 1.26 Sub-Saharan Africa: Cyclicality of Fiscal Policy and Commodity Price Cycle

  • 1.27 Selected Regions: Real GDP per Capita Growth, 2010–22

  • 1.28 Expected Average GDP per Capita Growth and Initial Levels of GDP per Capita, 2018–22

  • 1.29 Real GDP Growth Decomposition

  • 1.30 Decomposition of Labor Productivity Growth: Between (Reallocation) and Within (Labor Productivity Gain in Each Sector) Components

  • Chapter 2

  • 2.1 Sub-Saharan Africa: Financial Flows, 1980–2017

  • 2.2 Sub-Saharan Africa and Emerging Markets: Net Financial Flows, 1980–2017

  • 2.3 Sub-Saharan Africa: Liability Flows Before and After the Global Financial Crisis, 2000–17

  • 2.4 Sub-Saharan Africa: Composition of Liability and Asset Flows, 1980–2017

  • 2.5 Sub-Saharan Africa: Liability Flows, 1980–2017

  • 2.6 Sub-Saharan Africa: Surges in Net Financial Flows, 1980–2017

  • 2.7 Sub-Saharan Africa: Impact of External Factors on Direct and Portfolio Investment Liability Flows

  • 2.8 Sub-Saharan Africa: Predicted Probability of Surge and Reversal and US Interest Rate

  • 2.9 Sub-Saharan Africa: Predicted Probability of Surge and Reversal and Institutional Quality

  • 2.10 Sub-Saharan Africa and Emerging Markets: Impact of Global Factors, 2000M1–17M12

  • 2.11 Sub-Saharan Africa: Pre and Post-Global Financial Crisis Impact of Global Factors, 2000M1–17M12

  • 2.12 Sub-Saharan Africa: Macroeconomic Consequences of Portfolio Inflows

  • 2.13 Sub-Saharan Africa: Impact of Liability Flows on Domestic Investment

  • Chapter 3

  • 3.1 Sectoral Shares in Total Employment, 1995 and 2017

  • 3.2 Sub-Saharan Africa: Adoption of Connectivity Technologies, 1970–2014

  • 3.3 Model Estimates for GDP per Capita

  • 3.4 Model Estimates for Labor Share

  • 3.5 Frey-Osborne-Based Index of Countries’ Export Vulnerability to Automation

  • 3.6 Brynjolfsson, Mitchell, and Rock-Based Index of Countries’ Export Vulnerability to Automation

  • 3.7 Proportion of Individuals Using the Internet, 2016

  • 3.8 Monthly Cost of Fixed- and Mobile-Broadband Internet Connection, 2016

  • 3.9 Primary Net Enrollment Rate, 1999–2014

  • 3.10 Secondary Net Enrollment Rate, 1999–2014

  • 3.11 Exports of Goods to Different Regions, 2017



Economic and Monetary Community of Central Africa


emergency liquidity assistance


emerging markets


emerging market economies


foreign direct investment


gross domestic product


global positioning system


International Country Risk Guide


Millennium Development Goals


microfinance institutions


medium-sized enterprises


nonperforming loans


official development aid


public financial management


Regional Economic Outlook (IMF)


Sustainable Development Goals


state-owned enterprises


Sub-Saharan Africa


total factor productivity


United Nations


United Nations High Commissioner for Refugees


United Nations Office for the Coordination of Humanitarian Affairs


United States


vector autoregression


value-added tax


CBOE Volatility Index


West African Economic and Monetary Union


World Economic Outlook (IMF)


The October 2018 issue of the Regional Economic Outlook: Sub-Saharan Africa was prepared by a team led by Papa N’Diaye under the direction of David Robinson.

The team included Aidar Abdychev, Cristian Alonso, Emre Alper, Francisco Arizala, Romain Bouis, Reda Cherif, Dominique Desruelle, Xiangming Fang, Jesus Gonzalez-Garcia, Cleary Haines, Siddharth Kothari, Yun Liu, Miguel Pereira Mendes, Nkunde Mwase, Mathilde Perinet, Mahvash S. Qureshi, Sidra Rehman, Axel Schimmelpfennig, Preya Sharma, Torsten Wezel, Jaroslaw Wieczorek, and Mustafa Yenice.

Specific contributions were made by Alberto Behar, Paolo Cavallino, Shirin Elahi, Tunc Gursoy, and Mauricio Villafuerte.

Charlotte Vazquez was responsible for document production, with production assistance from Krisztina Fabo. The editing and production were overseen by Linda Long of the Communications Department.

The following conventions are used in this publication:

  • In tables, a blank cell indicates “not applicable,” ellipsis points (. . .) indicate “not available,” and 0 or 0.0 indicates “zero” or “negligible.” Minor discrepancies between sums of constituent figures and totals are due to rounding.

  • An en dash (–) between years or months (for example, 2009–10 or January–June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2005/06) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2006).

  • “Billion” means a thousand million; “trillion” means a thousand billion.

  • “Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).

Executive Summary

Recovery and Rising Risks

The macroeconomic outlook for sub-Saharan Africa continues to strengthen. Growth is expected to increase from 2.7 percent in 2017 to 3.1 percent in 2018, reflecting domestic policy adjustments and a supportive external environment, including continued steady growth in the global economy, higher commodity prices, and accommodative external financing conditions. Inflation is abating; and fiscal imbalances are being contained in many countries. Over the medium term, and on current policies, growth is expected to accelerate to about 4 percent, too low to create the number of jobs needed to absorb anticipated new entrants into labor markets.

However, there are concerns on the quality of the fiscal adjustment, and underlying vulnerabilities have yet to be decisively addressed.

  • More progress on domestic revenue mobilization is needed to ensure debt sustainability and create fiscal space for much needed investment and development spending. The fiscal adjustment thus far largely reflects the oil price rebound for oil exporters coupled with sharp cuts in capital spending in several countries. With few exceptions, there has been relatively little progress in strengthening domestic revenue mobilization; many countries have delayed adjusting domestic fuel prices in response to the recent oil price increase, resulting in the re-emergence of energy subsidies; domestic arrears remain large, contributing to a buildup in nonperforming loans (NPLs); and, beyond the central government, state-owned enterprises (SOEs) are becoming a major fiscal risk in some countries.

  • Financial sector vulnerabilities remain elevated with high NPLs weighing on banks’ balance sheets and constraining credit to the private sector.

  • On the external side, financial inflows were strong in the first half of 2018 with record issuances of Eurobonds but the recent turbulence in emerging markets has led to some increase in spreads. Reserve buffers have though, generally not been rebuilt and, in half of the countries in the region, remain below levels considered adequate.

The outlook is surrounded by significant downside risks. The global economy is entering a period of unusually elevated policy uncertainty; growth is already slowing in most advanced economies and could slow more sharply in the event trade tensions escalate; while spikes in commodity prices and populist pressures in the run-up to elections in several countries could derail consolidation efforts.

Shielding the recovery and creating enough jobs for the region to harness fully its demographic dividend would require strong, sustainable, and inclusive growth. Achieving this in turn would require policies to strengthen resilience and facilitate the reallocation of labor and capital into more productive sectors to lift incomes faster. These policies include steady fiscal consolidation to reduce debt vulnerabilities; advancing revenue mobilization; enhancing the efficiency of expenditures, in particular to address the re-emergence of wasteful energy subsidies; allowing greater exchange rate flexibility where institutional setups permit and barring balance sheets vulnerabilities; addressing growing financial sector weaknesses in a timely manner; and pursuing policies to foster private investment and enhance potential growth.

Capital Flows in Sub-Saharan Africa: Causes and Consequences

Cross-border capital flows to sub-Saharan Africa from nonofficial sources have increased sharply since the global financial crisis. Scaled by economic size, net capital flows to sub-Saharan Africa were higher than those to emerging market economies in recent years. Much of this increase has been driven by nonresident inflows—particularly portfolio flows. Empirical analysis shows that global factors, notably, United States interest rates, global risk aversion, and commodity prices, are important drivers of capital flows to sub-Saharan Africa. However, strong domestic fundamentals can help to mitigate the risks associated with volatile capital flows. The analysis also suggests that the domestic impact of capital flows depends on the type of flow. In general, portfolio flows tend to be more prone to moving the real exchange rate and output above trend, and to fuel credit growth—vulnerabilities that tend to raise the likelihood of a financial crisis. While, at least historically, portfolio flows have not been strongly associated with either domestic investment or growth, they do seem to boost public consumption (including social spending). By contrast, inward foreign direct investment appears to directly spur domestic investment, and in turn support economic growth. These findings indicate a complex relationship between external finance, domestic macroeconomic stability, and investment and economic growth in the region. Policymakers need to be prudent and ensure that the borrowed resources are used effectively, enhance productivity, and promote sustainable economic growth. Vigilance is also warranted against the buildup of macroeconomic and financial imbalances.

Future of Work in Sub-Saharan Africa

The current wave of technological advances is set to shake up the landscape for jobs across the world. Against this backdrop, how can sub Saharan Africa create the 20 million jobs per year needed over the next two decades to absorb its growing workforce? This chapter focuses on how the current wave of technological innovation—the Fourth Industrial Revolution—will impact sub-Saharan Africa’s comparative advantage and the nature of work within countries in the region. It draws on formal economic models but also on scenario analysis, which allow consideration of how the course of global economic integration and the impact of climate change could shape economic opportunities and thus the future of work in sub-Saharan Africa. The overarching policy challenge is to support the new and emerging sectors that drive growth. If successful, sub-Saharan Africa can create jobs for its young and growing population and make progress toward meeting the Sustainable Development Goals. Development strategies must adapt to the demands and prospects of the Fourth Industrial Revolution. Integration and connectivity are the key pillars of successful growth policies. This includes traditional and digital infrastructure, an education system that keeps pace with changing skill requirements, smart urbanization, safety nets for a volatile labor market, and trade integration.