JOHANNESBURG (Reuters) - Sub-Saharan Africa’s economy will grow more than 6 percent this year, the African Development Bank said on Tuesday, but its president urged governments to build resilience to capital outflows and commodity price shocks.
In an interview with Reuters, Donald Kaberuka rejected as “premature” suggestions the ‘Africa Rising’ narrative might have lost momentum as a slowing China economy depresses prices for commodities such as copper, and the run-down of the U.S. Federal Reserve’s bond-buying programme squeezes the flow of cheap capital into emerging markets.
“I still believe that Sub-Saharan Africa will do 6.4 percent in 2014,” Kaberuka said. This would be stronger that the 6.2 percent gross domestic product (GDP) growth the bank forecast in February and an estimated 5.8 percent for 2013.
Slowing stimulus from abroad has sharpened investors’ focus on governance in Africa’s biggest economies - South Africa and Nigeria - and in Ghana, long praised for its stability but now seen struggling to keep its debt and deficits under control after easy access to international financing.
A decade after historic debt relief, Kaberuka, one of the biggest cheerleaders of Africa’s growth story, saw these problems as “manageable” so long as governments exercised careful stewardship of their debts and budget deficits.
The AfDB president said the internal dynamics which had boosted Africa’s surge over the last decade were still in play. “The internal consumer power is still there, the booming urban populations are still there,” Kaberuka said.
Information technology advances were still “leapfrogging” across the continent at a rapid pace, and more governments were managing their economies better, he said.
“People should not rush to draw conclusions just because they see a macro-economic blip here and there,” Kaberuka said. “It’s a bump, no more than that.”
BEWARE “GOOD TIMES, BAD POLICIES”
Some economists and analysts have warned of a “Eurobond curse” that could exacerbate the distorting “resource curse” on African economies.
They point to Ghana, whose economy expanded 14.5 percent in 2011 as new oil finds swelled state revenues on top of income from cocoa and gold.
The IMF forecasts slower growth for Ghana this year of 4.8 percent and highlights the government’s inability to stop fiscal deficits widening, along with the current account gap which has weakened the cedi currency.
“There is a saying, that sometimes good times can lead to bad policies,” Kaberuka said, adding that cases like Ghana reinforced the need for African leaders to aim unwaveringly at lower inflation, debt and deficits.
It was by strengthening macro-economic fundamentals that many African states had buffered themselves in 2008 against the worst of the effects of the world financial crisis, the AfDB chief said. It was time again to deepen such efforts, he added.
“Countries took advantage of favorable markets to borrow - you can’t blame them for that. But now, as the (U.S.) tapering comes in, they will have to be more careful in how they borrow, they will have to strengthen domestic debt management, they will have to invest carefully,” Kaberuka said.
Speaking earlier at a business conference, Kaberuka said Africa also needed to build infrastructure to create a single market and make it easier for private sector business to grow.
“Macro-economic stability, which was achieved in Africa by many years of sweat and tears, should not be frittered away,” he said.
Reporting by Pascal Fletcher; Editing by Ruth Pitchford