Public Management

Growth slowdown in China will hit SSA hard (IMF)

Growth slowdown in China will hit SSA hard (IMF)
Tuesday, 17 October 2023 15:04

The International Monetary Fund identified sub-Saharan Africa as one of the regions to be hardest hit by the economic slowdown in China. In a recent report entitled “At a Crossroads: Sub-Saharan Africa’s Economic Relations with China”, the institution revealed that every percentage point drop in China's real GDP growth rate results in an average drop of around 0.25 percentage points in sub-Saharan Africa's GDP growth on an annual basis. Meaning that when China sees its economy decelerate, SSA feels the same.

The document noted that this correlation is primarily owed to the fact that over the past two decades “China has become the region’s largest trading partner, a major credit provider, and a significant source of foreign direct investment (FDI). Noting that the negative impact will stem mainly from the expected fall in export volumes and lower commodity prices, the report specifies that the effect will be more pronounced in oil-exporting countries where the expected decline in growth averages 0.5 percentage points for every one percentage point drop in growth in China's economy. In non-oil-exporting countries, the decline in growth averages 0.20 percentage points for every one-percentage-point fall in China's real GDP growth.

China's economy has been on a downward trend in recent years, due in particular to a slowdown in the real estate sector, the impact of health restrictions linked to the coronavirus pandemic and global geopolitical tensions. According to long-term forecasts, Beijing should record average annual growth of around 4% by the end of the current decade, compared with 7% in the decade preceding the health crisis.

In this context, the IMF recommends that SSA countries focus more on developing intra-regional trade, and mobilize greater investment in infrastructure and human capital.

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