London, UK | – The International Monetary Fund (IMF) cut its economic growth forecast for sub-Saharan Africa this year by 1.25 percentage points as plunging oil prices force exporters to curb spending plans.
Gross domestic product (GDP) is estimated to expand 4.5%, down from 5% in 2014, the Washington-based lender said in its World Economic Outlook. Further weakening of growth in China or Europe could reduce demand for African exports and curtail foreign investment in infrastructure and mining, it said.
Nigeria and Angola, Africa’s biggest oil producers, are among the hardest hit by an almost halving in crude prices since June. Angola’s government lowered budgeted spending by almost a quarter, while Nigeria has proposed cutting the oil price benchmark in its fiscal plan by 20%.
“Oil-exporting countries should enact prompt fiscal adjustments, while oil importers’ policy stances should strike the right balance between promoting growth and preserving stability,” the IMF said.
Nigeria’s economy is set to expand 4.8% this year, down from 6.3% in 2014, while Angola’s will probably grow 4.5%, compared with 4.2% last year, according to the IMF.
The IMF’s forecasts for sub-Saharan Africa are more optimistic than those of the World Bank, which said on Monday that economic growth will slow to 4% in 2015 from 4.5% last year.
Government spending decisions will need to balance the need for public investment while avoiding running up unsustainable levels of debt, the IMF said. Lower oil prices also give authorities an opportunity to cut fuel subsidies, it said.
Other risks to Africa’s economic outlook include “stronger persistence and regional impact of the Ebola epidemic, rising security concerns, and political uncertainty ahead of key elections,” the fund said.
Ivory Coast, Tanzania, Guinea, and Burkina Faso are some of the nations on the continent scheduled to vote in 2015.
Nigeria, the continent’s biggest economy and most populous country, held a landmark presidential election on March 28 that led to the Peoples Democratic Party losing power for the first time since military rule ended in 1999.
The South African economy is forecast to expand 2% this year, in line with the government’s forecasts, according to the IMF.