Economic growth in Sub-Saharan Africa is projected to speed up slightly to 5% this year from 4.9% in 2012 and to accelerate further to 6% next year, the International Monetary Fund (IMF) said in the October edition of its World Economic Outlook (WEO). In the April edition of the WEO, the IMF expected Sub-Saharan Africa’s growth to be at 5.6% this year and at 6.1% next year. The downward revision of the forecast is due to sluggish external demand, reversal of capital flows, and declines in commodity prices, while domestic demand remains strong and is the main growth driver in most of the region.

South Africa, the region’s biggest economy, has experienced a slowdown in growth mainly due to tense industrial relations, anaemic private investment, and weaker consumption growth, affected by slowing disposable income growth and weakening consumer confidence. The IMF lowered its growth forecast for the country to 2% for 2013 and 2.9% for 2014 from previously expected 2.8% and 3.3%, respectively. It noted that despite expectations of economic improvement in line with acceleration in global growth, the tighter financing environment, still weak investor and consumer confidence, continued tense industrial relations, policy uncertainty, and elevated household debt will weigh on economic performance.

The IMF has also cut its 2013 growth outlook for Nigeria to 6.2% from previously expected 7.2% mainly due to reduced oil production. It noted that the region’s second biggest economy is troubled by temporary downdrafts from security problems in the north and oil theft, while still high oil prices underpin growth in the country, which is the biggest oil producer in Africa.

The forecast for Angola, the second biggest oil producer in Africa, was also reduced significantly – to 5.6% from 6.2% for 2013 and to 6.3% from 7.3% for 2014, due to delays in budget execution. Elsewhere in the region, growth is forecast to remain fairly robust, driven by investment in infrastructure, energy, and natural resources projects, as well as increased output from projects coming on stream (Ghana, Mozambique, Niger, Sierra Leone). The IMF notes, however, that the recent weakness in international commodity prices may delay mining investment in some countries, while the medium-term growth in some resource exporters would also be affected by the Chinese economy’s slower growth trajectory.

The average annual inflation in the region is expected to fall from 9% in 2012 to 6.9% this year and 6.3% next year, helped by some moderate global food prices and prudent monetary policies. However, current account balances are projected to continue to weaken, from -3% of GDP in 2012 to -4% of GDP in 2013 and 2014, because of lower global commodity prices that affect exports and continued FDI-financed investment in infrastructure and natural resources.

The IMF urged Sub-Saharan African governments to deepen structural reforms and give priority to infrastructure investment and social spending in order to achieve sustainable and inclusive growth in the medium term.