Harare - The International Monetary Fund (IMF) is expecting modest recovery for Africa this year after the region notched up economic growth of 3.8% in 2015, managing director Christine Lagarde said in Nigeria on Wednesday.
She said “growth in sub-Saharan Africa (has been) driven by an extraordinary combination of improved policies, stronger institutions, high commodity prices, and high capital inflows” for over 10 years.
However, the region has now “entered a different phase, where commodity prices and capital flows are far less supportive”. This poses growth constraints for economies in the region such as Nigeria and others that are reliant on commodities.
Nigeria is Africa's biggest economy, followed by South Africa in second position. Lagarde said the economic outlook for Nigeria has weakened with growth in 2015 estimated at 3.2%.
"For a country with a rapidly increasing population, this means almost no real economic growth in per capita terms," she said in an address during her visit to the West African nation.
She advised that "hard decisions will need to be taken on revenue, expenditure, debt, and investment going forward" to help grow the Nigerian economy, which is facing a slowdown from low oil prices.
Strengthening Nigeria’s external position is also seen as an immediate policy priority, given “the massive fall in oil prices - which is expected to continue”.
Lagarde said this could only be achieved through measures such as “flexible exchange rate and disciplined fiscal policies, as well as implementing structural reforms” to boost external competitiveness.
“Additional exchange rate flexibility - both up or down - can help soften the impact of external shocks, make output and employment less volatile, and help build external reserves. It can also help avoid the need for costly foreign exchange restrictions - which should, in any case, remain temporary,” added Lagarde.
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