The International Monetary Fund has amended its 2015 economic growth projection for sub-Saharan Africa by almost 1 percentage point as falling oil prices curtail output in the region. The region’s economy is forecast to expand 4.9% this year, down from a previous projection of 5.8%, and grow 5.2% in 2016.
The plunge in oil prices by more than half since June have severely affected revenue and investment plans as well as credit rating in oil producing countries like Nigeria and Angola that rely on crude proceeds for about 75 percent of government revenue. Nigeria’s growth outlook has been lowered to 4.8% from 7.3% estimated in October. South Africa’s growth forecast for this year is 2.1% down from 2.3%. The economy is set to expand by 2.5% in 2016, down from an earlier estimate of 2.8%.
The crisis is a wakeup call for Africa to shun single commodity dependence. In 2011 for example, 34 out of 52 African countries were more than 50% commodity dependent, while others such as Benin and Burkina Faso were more than 65% dependent. African countries need not be locked up in retarded growth and poverty traps that involve low productivity and high exposure to external shocks fostered by the volatility of export earnings. Developing multiple commodity exchanges and reviewing the neglected but productive areas of the economy is a good way forward.