1. Our Zimbabwean authorities appreciate the constructive engagement with IMF staff during the recent Article IV Consultation. They value Fund policy guidance and broadly share the staffs assessment of attendant macroeconomic challenges and key policy priorities.
Economic growth in sub-Saharan Africa this year is set to drop to its lowest level in more than 20 years, reflecting the adverse external environment, and a lackluster policy response in many countries. However, the aggregate picture is one of multispeed growth: while most of non-resource-intensive countries—half of the countries in the region—continue to perform well, as they benefit from lower oil prices, an improved business environment, and continued strong infrastructure investment, most commodity exporters are under severe economic strains. This is particularly the case for oil exporters whose near-term prospects have worsened significantly in recent months. Sub-Saharan Africa remains a region of immense economic potential, but policy adjustment in the hardest-hit countries needs to be enacted promptly to allow for a growth rebound.
Against the backdrop of lower commodity prices and a less-supportive global environment, economic activity in sub-Saharan Africa has decelerated sharply. The region’s output is only expected to expand by 1.4 percent in 2016, the worst growth performance in more than 20 years, and the loss in momentum over the last two years has been on par with the deep slowdowns of previous decades (Figure 1.1). While a modest recovery is in the cards for next year, to slightly less than 3 percent, even this will only be feasible provided there is prompt action to address the significant macroeconomic imbalances and heightened policy uncertainty prevalent in several of the region’s largest economies.
As elsewhere, exchange rate regimes in sub-Saharan African countries vary greatly, and have evolved over time. Recent IMF work on exchange rate regimes suggests that there is no single prescription, and that the appropriate regime for a country depends on the macroeconomic challenges facing the country and its particular circumstances (see Ghosh, Ostry, and Tsangarides 2010). The exchange rate regime in turn has bearing on economic outcomes, but alongside other macroeconomic policies as well as the strength and depth of institutions.
The 2014–15 Ebola epidemic in West Africa and the 2016 droughts induced by El Niño in parts of Eastern and Southern Africa have brought to the fore the economic and social costs posed by natural disasters in sub-Saharan Africa. Policymakers have struggled to manage the impact of these crises, which have had adverse effects on macroeconomic performance. The significant international spillovers and scale of humanitarian relief needs drive home the point that these challenges are a concern of global as well as regional scale.