IMF warns African leaders about looming economic turbulence

Peter Sesay

Africa is home to six of the fastest-growing economies in the world, but recent economic slowdown in China and possible hike in U.S. interest rates may soon hinder economic growth across the continent, says the head of the International Monetary Fund.

While addressing Rwandan legislators in Kigali, the Rwandan capital, IMF’s managing director, Christine Lagarde, warned that African nations may be negatively impacted by stagnant economic activity in China. “Momentum is slowing in many advanced and emergng economies, including China—one of Africa’s main trading partners,” commented Lagarde.

China’s economic growth is at its slowest since the country was subject to sanctions after the government’s handling of the Tiananmen Square protests. The slowdown has been attributed to a number of factors, most notably a decrease in capital outlays and an inert housing market. Economists fear that China’s economic growth may worsen, predicting that it may fall to as low as 6.8 percent in 2016.

Making matters worse for African economies are looming interest rate hikes in the United States, as part of the expected so-called “monetary policy normalization.” Such measure will most affect African nations that rely on oil exports for economic sustenance—especially Nigeria and South Sudan. “Even if this process is well-managed and well-communicated–and I believe that it has been and will be–there could be negative effects for emerging markets and global financial stability. African economies could also be impacted,” warned Lagarde.

Although the IMF has attenuated economic projections worldwide, Lagarde believes that sub-Saharan economic growth will fare well at 5 percent; however, she advises countries in the region to apply “vigilance” in their surveillance of day-to-day economic activity.