In its
latest Regional Economic Outlook, the IMF forecast 5.4 percent growth
this year from 5.1 percent in 2011. Its previous projections were 5.9
and 5.5 percent respectively.
"The growth outlook for 2012 is
somewhat less favorable than outlined in the October 2011 Regional
Economic Outlook, with the growth projection for 2012 now cut by almost
one-half a percentage point, driven in large part by the weaker economic
outlook for South Africa," the IMF said.
Growth in Africa's economic
powerhouse was likely to be a relatively modest 2.7 percent this year
and 3.4 percent in the next, held back by its reliance on trade with
Europe and close links with western financial markets, the fund said.
However,
an upturn in drought-hit East Africa, fresh output in new natural
resource producers such as Niger and Sierra Leone and recovery in
post-conflict nations such as Ivory Coast should help boost the
continent's economic activity in 2012.Sierra Leone and Niger could
post outstanding growth of 35.9 and 14 percent respectively. Big
oil-producers Nigeria and Angola will also be major drivers of the
expansion.
Economies reliant on non-renewable resources are
experiencing faster growth but are also suffering the worst volatility
in exports, revenues and GDP expansion, the IMF said.
The fund also said the rapid expansion of pan-African banks may be cause for concern in countries with poor regulation.Banks
such as South Africa's Standard Bank, Togo-based Ecobank and Kenya's
KCB have been widening their reach, increasing competition in their new
markets while improving technology and expertise.
"But rapid
expansion of these groups may, in some cases, have outpaced supervisory
capacity. Under adverse economic conditions across the region, these
banking grounds could become a channel for cross-border contagion," the
IMF said.Countries with fast-expanding loan books should prioritize
strengthening the resilience of their financial sectors, the IMF said,
pushing for cross-border supervision in the region.
"Effective
mechanisms for limiting cross-border contagion, such as ring-fencing
arrangements aimed at preserving subsidiaries' resources could be added
to a review of existing banking-resolution frameworks," the IMF said.
Other
than Nigeria, most African banking systems have remained resilient in
the face of global financial stress due to their limited exposure to the
global financial system, although they have suffered because of a drop
in trade levels.
However, the IMF also cited Zambia as an example of
an open frontier economy that can suffer a commercial credit crunch when
foreign interest in sovereign bonds dries up and local banks switch to
being solely financiers for the government.
