Sub-Saharan Africa is tipped to record growth in coming years with the International Monetary Fund (IMF) forecasting close to 6% growth in 2014. However, IMF managing director Christine Lagarde has warned that slowing emerging market growth is a concern for the region’s future.
Speaking to business leaders in Nairobi, Kenya, the IMF boss noted that the expected volatility in emerging markets present risks for sub-Saharan Africa countries that are more financially integrated with the global economy, such as Kenya.
“Emerging market economies have for many years been the engine for growth. That is slowing down a bit,” said Lagarde. “[This is] important for Kenya and Africa in general because the relationship and the spillover from what is happening in the emerging markets is going to affect or hit the African countries that have strong ties to emerging markets.”
Sub-Saharan Africa is the second fastest growing region in the world after developing Southeast Asian countries and has maintained an average growth of 5% in the last decade.
According to Lagarde, spillover effects of capital outflow in emerging markets will affect sub-Saharan Africa countries that supply commodities in significant quantities.
“Actually when you look at the last five years, it is fascinating to see how the strong growth of emerging market economies have actually sheltered and put a shield on some of the African countries and have protected them in a certain way. So any change in the emerging markets is bound to be a matter of concern.”
Lagarde said that while the region’s outlook is encouraging it “is not without risk”, noting that “policy makers as a result must remain extremely vigilant” to threats from slow demand in emerging market economies.
“Looking forward… sub-Saharan Africa cannot afford complacency because immense challenges remain.”
The IMF boss said growth in sub-Saharan Africa in the last decade, particularly in East Africa, has contributed to higher living standards and poverty eradication. However, poverty in the region and across Africa “remains at unacceptably high levels”.
“Africa can and must grow faster and better in order to address pressing social problems, provide jobs for its young and growing population.”
Lagarde said indicators show progress and clear recovery globally, led by the US. She added that Japan is “heading in the right direction while Europe is slowly emerging from deep recession” but still has a lot to do in terms of structural reforms.
“Major progress has been made but we are not out of the woods. The global recovery that is underway remains uneven and subdued.”