Stagnating incomes in sub-Saharan Africa's resource-intensive economies are calling for more effective fiscal management and broad-based structural reforms, according to a recent analytical note from the Regional Economic Outlook for the region.
Despite being home to nine of the world's top twenty fastest-growing economies this year, discussions about sub-Saharan Africa often focus on its modest average economic performance. This reflects a two-track growth pattern, with significant parts of the region underperforming.
Over the past decade, growth in resource-intensive countries (RICs) such as Angola, Chad, and Nigeria has slowed sharply compared to non-RICs like Ethiopia, Rwanda, and Senegal. The slowdown marks a stark contrast to rapid growth before 2014 when RICs performed strongly.
The divergence post-2014 is attributed mainly to two factors. Firstly, RICs experienced a dramatic decline in commodity export prices around 2014–15 as the commodity "super-cycle" ended. Secondly, pre-existing structural vulnerabilities such as poor business environments and weak governance exacerbated the impact of these terms-of-trade shocks.
IMF staff analysis highlights that terms-of-trade shocks have a more prolonged impact on growth in countries with weak governance. It estimates that medium-term growth is higher by about ¼ percentage point in countries with fewer governance challenges for every one-percent worsening in terms of trade.
Additionally, poor resource management has intensified economic shocks through pro-cyclical fiscal policies. Many RICs engage in costly capital projects during high commodity prices but reduce spending sharply when prices fall. Fuel subsidies further limit savings during booms while crowding out development spending.
Reversing this growth divergence is essential as RICs account for about two-thirds of sub-Saharan Africa's GDP and population. Poor growth performance has led to stalled progress against poverty since 2014. A child born today in an RIC is expected to live four years less than those elsewhere in the region and is 25 percent more likely to live in poverty.
To reignite durable growth, a stable macroeconomic environment is necessary alongside prudent fiscal frameworks addressing poor resource management challenges. Broad-based reforms targeting structural weaknesses can help diversify economies and foster growth. For fuel exporters facing global green-energy transitions, diversification is increasingly urgent.
Saad Quayyum and Nikola Spatafora are senior economists; Sanghamitra Mukherjee is an economist; Hamza Mighri is a research analyst at the IMF’s African Department.
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