Africa growth to slow amid turmoil, inflation: IMF

from Reuters Africa

WASHINGTON - Growing financial turmoil and rising food and energy prices are likely to slow economic growth in sub-Saharan Africa, with oil-producing countries least affected the International Monetary Fund said on Wednesday.

In its twice-yearly health-check of the world economy, the IMF said growth across the region should slow to 6.1 percent this year, rising to 6.3 percent in 2009, from nearly 7 percent in 2007.

Oil producing countries will be only slightly affected, with growth easing to 7.5 percent from around 8 percent in 2007, the IMF said.

Meanwhile, for countries that import oil the terms of trade will remain broadly the same this year, with higher oil prices offset by costlier export prices for metals, coffee, cocoa and cotton.

In South Africa, Africa's biggest economy, electricity shortages and a necessary 500-basis point interest rate rise since 2006 to contain inflation, should cut growth to 3.5 percent in 2008-09 from 5 percent in 2007.

The fund said a widening current account gap in South Africa, which stood at 7.2 percent of gross domestic product in the second quarter, was a concern, especially since it is financed by portfolio flows that have been affected by the market turmoil.

"The deficit is financed largely through volatile portfolio flows, although low external debt and a flexible exchange rate should provide some resilience if capital flows were to reverse," the IMF said.

The South African central bank has steadily built up its reserves to help cushion the country against economic shocks.

But the IMF said it was also worried about the impact that higher food and fuel prices might have on economies in Africa, especially since food is a large part of families' spending.

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