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Sub-Saharan Africa Would Be Hit By Global Slowdown, IMF Says

October 19, 2011

(Updates with IMF official’s comment in fifth paragraph.)

Oct. 19 (Bloomberg) -- Sub-Saharan Africa cannot count on demand from emerging markets such as China to be shielded from another global slowdown if the outlook in developed economies worsens, the International Monetary Fund said.

If weaknesses in Europe and the U.S. drag global growth down by 1.5 percentage points from the 4 percent foreseen for this year and next, expansion in a “representative” low-income country would be cut by 1 percentage point in 2012, the IMF said today. South Africa and other middle-income countries could be affected more, it said.

“Should advanced economies’ growth slow further, our expectation is that by lowering import demand, this will lower growth in many of the large emerging markets,” the IMF wrote in its Regional Economic Outlook published today. “Under these circumstances, it would be prudent not to expect that either export demand or commodity prices will be as buoyant in the future as they have recently been.”

Sub-Saharan Africa, the world’s poorest region, avoided recession three years ago as rising demand from China and India for commodities, including copper and platinum, boosted exports. Under its current scenario, the IMF said it expects growth in the region to reach 5.25 percent this year and 5.75 percent in 2012.

The area is also facing risks of its own, the IMF said, citing inflationary pressures in East Africa and political turmoil. Average consumer-price growth in sub-Saharan Africa quickened to 10 percent in June, compared with 7.5 percent the same month a year earlier, driven largely by global food and fuel prices, Antoinette Sayeh, director of the IMF’s African Department, told reporters today in Nairobi, the Kenyan capital. The higher prices for goods are becoming entrenched in some economies, she said.

‘Very Worrisome’

“We are concerned that the second-round price increases 1are taking hold,” Sayeh said. “That is very worrisome.”

Central banks in some African economies that have been too slow or even failed to raise interest rates following the last global financial crisis in 2008-2009, should now take action to stop prices pressures from further building up, Sayeh said.

“Monetary-policy-committee tightening in the region has been limited,” she said. “Not enough has been done.”

The exceptions are countries such as Kenya, Sayeh said, whose central bank raised its key lending rates on Oct. 5 by 4 percentage points to a record 11 percent to combat inflation and rescue its currency, a day after Uganda raised its key lending rate by the same amount to 20 percent. Kenya’s and Uganda’s shillings are the world’s worst-performing currencies this year, each losing about a fifth of their value against the dollar.

--Editors: Gail DeGeorge, Christopher Wellisz, Heather Langan, Karl Maier

To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net; Sarah McGregor in Nairobi at smcgregor5@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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