High commodity prices will buoy much of sub-Saharan Africa in 2012, but South Africa will continue to stumble due to its deep ties to crisis-ridden Europe, the International Monetary Fund said on Tuesday.
The IMF also predicted a 7.1% growth in Nigeria’s economy this year.
Growth in sub-Saharan Africa will pick up to 5.4% this year thanks to new mineral and oil production and the growth of export markets outside Europe, according to the fund’s latest world economic outlook.
But South Africa, the region’s largest economy, will grow by a modest 2.7% this year, as it struggles with weaker terms of trade and a decrease in business confidence.
“Sluggish growth in South Africa may require some policy support,” the report said.
According to Reuters, South Africa depends on Europe as a market for its high value-added exports, and has seen soaring unemployment, stock market volatility and currency depreciation, due to the eurozone’s sovereign debt crisis.
South Africa’s 2012 growth forecast was revised up from 2.5% in January, while a projection for regional growth in 2012 was revised down modestly from 5.5%.
Many other sub-Saharan countries have benefited from limited exposure to Europe as well as rebounding agricultural sectors after last year’s droughts, the report said.
Oil exporting sub-Saharan countries are projected to grow by 7.3% in 2012, buoyed by oil production in Angola. The reports said that Nigeria, another major oil producer, will grow by 7.1%.
Despite the generally rosy predictions, the IMF warned of knock-on effects to African economies if Europe tumbles further.
Such a shock would likely be transmitted via South Africa, and would hit African exports, remittances, aid and private investment.
“Adverse shocks affecting South Africa can quickly spread to neighboring economies, through their effect on migrant workers’ incomes, trade, regional investment, and finance,” the report noted.
South Africa should consider further monetary easing if the slowdown continues, the report noted, as long as inflation remains low.
