THE International Monetary Fund (IMF) has carved out a curiously reverent reputation around these parts, given the often-bitter pills it forces down the throats of its African patients.
The perception on the whole is hit and miss—many patients recover, while others become even more ill.
Together with its sister the World Bank the pair periodically put out economic growth forecasts, with the IMF known for its more surly outlooks.
True to form it has sought to row back on 2015 growth projections for sub-Saharan Africa it made last October, shaving nearly a full percentage point, in what are its steepest reductions in three years.
The Washington-based lender projects a 4.9% growth rate this year, down from its previous 5.8%.
This is still rosier than the normally more-optimistic World Bank’s 4.6% growth forecast for the region this year.
The IMF in more true fashion however seeks to cast a damper on the optimism surrounding the sharp decline in oil prices, which while describing as a “net positive” for the world, adds rather cryptical will be weighed down by underlying weakness elsewhere.
It notes that while it had forecast a rebound in growth for commodity exporters in developing economies, this will be weaker or delayed, due to the impact of lower prices, hurting medium term growth.
Even for net oil importers, the expected lift will be less than in advanced economies, with governments particularly benefiting from the windfalls, it says, admitting it is a “complicated picture”.
“It means good news for oil importers, bad news for oil exporters. Good news for commodity importers, bad news for exporters. Continuing struggles for the countries which show scars of the crisis, and not so for others. Good news for countries more linked to the euro and the yen, bad news for those more linked to the dollar,” said Olivier Blanchard, the IMF’s Economic Counsellor and Director of Research.
Nigeria’s growth forecast has been lowered from 7.3% to a still healthy 6.1%, but this will be cold comfort for the west African country that has been forced into austerity measures, including a devaluation of its currency, and several recalibration of its budgets.
Nigeria, Africa’s biggest economy, depends on crude exports for 70% of government revenue and some 90% of its foreign exchange earnings.
However services now account for nearly half to its Gross Domestic Product (GDP), helping to shield the country’s economy, even if increased defence spending will hit the budgets. Nigeria spends twice as more on defence than on education.
For lethargic South Africa, the IMF now projects growth of 2.1% this year, from its earlier 2.3%. The World Bank however sees the region’s most sophisticated economy turning things round, buoyed by improving labour relations and reforms in the troubled energy sector.
Based on the weaker global growth forecast the IMF is urging structural reform in all countries, despite differing macroeconomic priorities.
Globally the world will grow at 3.5% this year, from 3.8% projected last year. This is close to the World Bank’s more dour forecast of 3%.
The revision comes as world leaders descend on Davos for the annual World Economic Forum, with global inequality identified as a major talking point.
International anti-poverty charity Oxfam has stoked debate after it published research that shows that the world’s richest 1% will by next year own more wealth than the bottom 99%.
Oxfam sought to put this in perspective by referencing the amount used by US health firms to lobby in 2013—close to half a billion dollars—money which creates more billionaires.
Notably, Oxfam International’s Executive Director Winnie Byanyima, is co-chairing the Davos meet with Hari S. Bhartia, Co-Chairman and Founder, Jubilant Bhartia Group, India, Jim Yong Kim, President of The World Bank, Eric Schmidt, Executive Chairman Google, and Roberto Egydio Setubal, Chief Executive Officer and Vice-Chairman of the Board of Directors, Itaú Unibanco, Brazil, so the inequality issue is likely to receive a bit of air time.
One such rich individual, the Italian-born Stefano Pessina who now lives in the tax haven of Monaco, increased his net wealth by $4 billion between 2013 and 2014, enough to cover the estimated $1.17 billon economic cost of Ebola to the three largest hit countries between last year and 2015.
The pope and IMF chief Christine Lagarde have both warned that rising inequality will hit the world economy if not checked.