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IMF warns of El Niño drought’s impact on growth outlook in sub-Saharan Africa

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THE International Monetary Fund (IMF) has warned that risks to the sub-Saharan African economic outlook were tilted to the downside as a result of the impact of the El Niño-induced drought.

The ongoing strong El Niño event has been driving drier, hotter weather conditions and below-average rainfall across much of southern Africa since late 2023, resulting in below-average harvests and poor macroeconomic conditions.

El Niño has resulted in widespread crop failure looms in Malawi, Zambia, and Zimbabwe, and livestock dying at alarming rates due to a lack of water and vegetation, with more than 9 000 cattle deaths being reported since October 2023.

In its Regional Economic Outlook on Friday, the IMF said climate change was exacerbating sub-Saharan Africa struggles, weighing on agricultural yields and labour productivity in an already vulnerable region.

IMF’s director for African Department, Abebe Selassie, said their optimistic growth forecasts for sub-Saharan African countries such as Malawi had been made prior to understanding the devastating effects of El Niño which began in November.

Selassie said if the drought in southern Africa persisted, the negative on the 2024 economic outlook could be significant in some countries and also put pressure on external balances and public spending.

Moreover, Selassie said this could exacerbate the food insecurity situation in sub-Saharan Africa, posing a major humanitarian challenge and weighing on productivity and economic prospects.

“My heart goes out to the people of southern Africa, in Malawi, Zambia, Zimbabwe, parts of Mozambique and even further south. We really are worried about this shock just as the region was recovering from all the effects of the pandemic and other shocks,” Selassie said.

“This latest shock is a reminder of just the damage that climate change is bringing to the region. So we are sending a team very shortly to Malawi to do a full assessment and see how we can provide support to Malawi and other countries that are being impacted.”

Earlier last week, the IMF lowered South Africa’s growth forecast to 0.9% for 2024, down from 1.8% projected in October, on the back of constrained activity due to energy and logistical challenges.

In spite of this, the Washington DC-based lender is forecasting that regional outlook is gradually improving with economic activity tepidly picking up in sub-Saharan Africa.

Selassie said growth will rise from 3.4% in 2023 to 3.8% in 2024, with nearly two thirds of countries anticipating higher growth.

He said this economic recovery was expected to continue beyond this year, with growth expected to reach 4.0% in 2025.

“We expect economic growth to rise to 3.8% in 2024, from 3.4% last year. After peaking at almost 10% in late 2022, inflation has nearly halved to around 6% in the early part of the year thanks to decisive action by central banks.

“This includes slower food price increases, a positive development for a region where the cost of crises has been acute in recent years. In addition, fiscal consolidation efforts are starting to pay off, with the median public debt stabilising at around 60% of GDP, halting a 10-year upward trend.

“And with global financial conditions easing, a few countries have been able to return to international markets, ending a two-year hiatus. These are encouraging signs. But the region is not out of the woods yet.”

The impact of El Niño is expected to filter through to consumer prices in the second half of this year.

Oxford Economics Africa senior economist Jee-A van der Linde said the intensification of El Niño puts under pressure Southern Africa’s entire supply chain of maize, the region’s main staple along with sorghum and wheat.

Van Der Linde said higher food prices as a result of El Niño are not the only risk to price inflation, especially in the case of South Africa.

“The prevailing El Niño weather pattern looks set to result in possible white maize shortages in southern Africa, which will cause a reversal in maize meal prices and drive food price inflation higher towards the end of 2024,” he said.

“Although the effects of the current El Niño might not be that acute for South Africa, the broader regional impact is likely to be more noticeable.”