Sub-Saharan Africa’s economy will probably expand 5.4 percent this year as rising commodity prices and increased oil production help to offset a slowdown in Europe, the International Monetary Fund said.
Growth is set to accelerate from 5.1 percent in 2011 and compares with 5.5 percent estimated in January, the Washington- based lender said in its World Economic Outlook report today. The IMF raised its growth forecast for South Africa, the region’s largest economy, to 2.7 percent for this year from 2.5 percent.
Higher commodity prices and increased oil production are muting the impact of the European debt crisis, helping sub- Saharan Africa grow the fastest after Asian developing countries. African nations are also reducing their dependence on Europe, which is set to contract 0.3 percent this year, by selling exports to other emerging markets, according to the IMF.
“Sub-Saharan Africa has seen only small downward revisions to its growth projections,” the IMF said. “Strong terms of trade and increased diversification toward fast-growing emerging markets have helped support the region.”
Exports to euro-area nations dropped to about 20 percent of total shipments from about 40 percent in the 1990s, the IMF said. The price of oil has climbed 16 percent in the past six months, reaching as high as $109.77 a barrel in New York in February. The UBS Bloomberg commodities index that tracks prices for metals and agricultural goods has increased 2.3 percent this year.
South Africa is more exposed to a slowdown in Europe, which buys about a third of the nation’s manufactured exports, according to the IMF. Finance Minister Pravin Gordhan, who cut this year’s growth forecast to 2.7 percent from 3.4 percent, said yesterday the European crisis continues to threaten growth.
Further interest rate cuts may be necessary in South Africa if there’s a “protracted slowdown,” the IMF said. The central bank has kept its benchmark interest rate at 5.5 percent, the lowest level in more than 30 years, since November 2010 to help support the economy even as inflation exceeded the 3 percent to 6 percent target.
Slower growth in South Africa may undermine the outlook for the region, the IMF said.
“Adverse shocks affecting South Africa can quickly spread to neighboring economies, through their effect on migrant workers’ incomes, trade, regional investment, and finance,” the IMF said.
Rising oil output in Nigeria and Angola will bolster growth in Africa’s largest crude producers, the IMF said. Nigeria, the second-largest economy in the region, will probably expand 7.1 percent this year, compared with 7.2 percent in 2011, while Angolan growth is set to accelerate to 9.7 percent from 3.4 percent.
Inflation in sub-Saharan Africa will probably accelerate to an average 9.6 percent this year from 8.2 percent in 2011, led by East African nations where a drought and food shortages have driven prices higher.
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