After a decade of growth, the outlook for sub-Sahara Africa looks bleak as economies start to rapidly slow, says the International Monetary Fund.
Growth forecasts have been slashed to 3.75%, the lowest level for six years, in the latest African Economic Outlook.
However, the IMF feels growth could spurt again next year by up to 4.25%.
Africa is feeling the same economic downturn effects as the rest of the world.
Commodity producers are suffering from the falling oil price and oil companies pulling out of infrastructure investments to cut costs as well as seeing a lack of demand from their biggest customer in China.
Less revenue and a weaker demand combined are having an adverse effect across the region, explained the IMF.
“Selling natural resources to China bolstered the economies in the region, and now this market has almost evaporated,” said an IMF spokesman. “Other emerging markets are also suffering and decreasing their demand for resources at the same time.
“The economic risk is more to the downside for the sub-Sahara as a result.”
The drop in oil prices and a lack of market share has hit oil producers hard.
Nigeria and Angola, the region’s largest producers, are coping on revenues at $50 a barrel for oil which was double that amount a year ago.
Zambia, Ghana and South Africa have also seen a massive drop in the prices paid for mineral exports alongside a falling demand.
Call for currency depreciation
The IMF is warning that governments must act if they want to move back to faster growth and that currency depreciation is one economic tool that they must consider wielding to do so.
“Devaluing currencies will make their export prices more attractive to overseas markets,” said the spokesman.
Another economic issue holding back growth in the region pointed out by the IMF is a continuing income and gender inequality.
“Although inroads have been made into poverty levels, the region has the highest poverty rate in the world and little has been done to address the gap between gender and income inequality,” said the IMF report.
“We would have expected to see income inequality level out during growth periods, but it has remained broadly the same although the results vary between countries.”