The International Monetary Fund on Tuesday cut its 2012 forecast for Africa along with most other countries around the world as the euro zone crisis dampens global demand and higher food prices weigh on food-importing countries in the region.
In its latest World Economic Outlook, the IMF shaved its 2012 projections for Africa to 5 percent from 5.4 percent. However, it revised up its 2013 outlook to 5.7 percent from 5.3 percent.
The Fund said spillovers from the euro zone crisis into Africa have so far been modest except for South Africa, which has close financial and trading ties with Europe.
The IMF cut its 2013 forecast for South African growth to 3 percent from a July projection of 3.3 percent mainly due to the impact from the continuing euro zone debt crisis. It maintained its 2012 projection of 2.6 percent.
“If the euro area crisis escalates further and global growth slows further, Sub-Saharan Africa’s prospects will be less favorable,” the IMF said.
“South Africa, strongly linked to Europe, would be particularly affected, with possible repercussions for some economies in southern Africa,” the Fund said, “Softer commodity prices would adversely affect the region’s natural resource exporters,” it added.
The IMF cautioned that African countries could also be hit if China’s economy slowed sharply. China’s economic growth is expected to be the lowest in more than a decade this year.
Increasing Chinese foreign direct investment and government funding to African countries has made it an important player in the region.
“The priority in much of the region is to continue to strengthen policy buffers and prepare contingency plans if downside risks materialise,” the IMF added.