Abuja, Nov. 11, 2023: The International Monetary Fund(IMF) says China’s slowing economy will hit Sub-Saharan Africa’s (SSA) growth.
This is according to the IMF Country Focus Report by Hany Abdel-Latif, Wenjie Chen, Michele Fornino, and Henry Rawlings.
The report said China’s economic engagement with SSA was evolving, with implications for growth, trade, and investment.
It said China had forged deep economic ties with countries in SSA over the past 20 years, making it the region’s largest single-country trading partner.
The report said China buys one-fifth of the region’s exports—metals, minerals, and fuel and provides most of the manufactured goods and machinery imported by African countries.
“However, it said China’s recovery from the pandemic had slowed recently due to a property downturn and flagging demand for its manufactured goods as global growth had also slowed.
” How this will affect Africa, the latest Regional Economic Outlook said one percentage point decline in China’s growth rate could reduce average growth in the region by about 0.25 percentage points within a year. ”
It said for oil exporters, such as Angola and Nigeria, the loss could be 0.5 percentage points on average.
The report said the ripple effects of China’s slowing economy extended to sovereign lending to sub-Saharan Africa, which fell below one billion dollars in 2022, the lowest level in nearly two decades.
“Chinese loans to the region rose rapidly in the 2000s, with the country’s share of total sub-Saharan African external public debt jumping from less than two per cent before 2005 to 17 per cent by 2021.
“This makes China the largest bilateral official lender to countries in the region.
“However, the share of debt owed to China remains relatively small, at just under six per cent of the region’s overall public debt, and is mostly owed by five countries—Angola, Cameroon, Kenya, Nigeria, and Zambia.”
The report said with the geoeconomic fragmentation on the rise, sub-Saharan African countries would need to adapt to China’s growth slowdown and declining economic engagements.
It said it would be done by building resilience through increased inter-African trade and by rebuilding buffers, including through tax policy reforms and improvements to revenue administration.
The report said efforts to diversify African economies were also vital to sustain future growth.
“The strong demand for minerals that support renewable energy development could provide an opportunity for countries to forge new trade relationships and develop more local processing capabilities.
“Countries can improve their competitiveness by creating a favorable business,” it said.
