SADC macro convergence
Windhoek ‑ SADC economies have made strides towards macro-economic convergence, one of the critical and key building blocks towards the establishment of a planned SADC monetary union.
Analysts at African Development Bank (AfDB) say that the southern African bloc has maintained a good track record in macro-economic management averaging gross domestic product (GDP) growth rate of 5.1 percent between 2000 and 2008. Average GDP rate however registered a negative 1.4 percent in 2009 in line with the slowdown in the global economy but rebounded to 4.9 percent in 2011, before moderating, on average, to 4.2 percent in 2012.
The AfDB says that growth has been strongest in Angola, Mozambique and Namibia, buoyed by the rise in commodity prices and large foreign capital inflows supporting capital investments in Mozambique.
The Zimbabwean economy rebounded in 2009 having suffered from a decade of negative growth, but has since subdued to less than 5 percent in 2012, reflecting a debt overhang and limited space to apply monetary policy tools, among other structural constraints, analysts at AfDB said.
The bank, which assessed the macroeconomic developments in all SADC member states, said that Southern Africa’s current account balance is “regarded as sustainable” and individual member countries have broadly stayed within the SADC macro – economic convergence target of less than 9 percent of GDP.
Estimates for 2012 indicate that current accounts remain within target for Lesotho, Mauritius, Mozambique and Zimbabwe whilst resource rich countries such as Angola and Botswana posted surpluses of 9.6 percent and 5 percent respectively.
Most countries in the region have achieved low fiscal deficits in line with macro-economic convergence targets of less than 5 percent of GDP by 2008 and 3 percent of GDP by 2012, the AfDB said.
“Fiscal deficits broadly remain within the macroeconomic convergence targets, reflecting strong fiscal discipline across the board,” the analysts at AfDB said.
Regionally, inflation averaged 7.4 percent between 2009 and 2012, easing from an anomalous peak of 11.5 percent recorded during the height of the global financial crisis in 2008.
The region targeted to reduce inflation to single digit by 2008, further aiming to ease it down to an average five percent by 2012 and 3 percent by 2018, the year it originally planned to launch its monetary union.
“Mauritius and Zimbabwe were the best performers over this period with inflation rates of 4 percent on average, whereas Angola, Malawi and Mozambique, inflation rates periodically exceeded 10 percent,” the AfDB analysts say.
“In 2012, the Southern Africa region met the SADC macroeconomic convergence targets with respect to debt-to-GDP ratio, fiscal deficits and current account deficits. The analysis of performance over the past decade indicates sustained improvements in the management of debt and inflation. On the other hand, some of the current account and fiscal balance gains achieved prior to the crisis have been eroded by the significant negative effect of global economic trends on these accounts,” the AfDB analysts say.
The AfDB also said that growth performance in the region is benefitting from prudent macroeconomic policies which have become a mainstay in most countries.
“Fiscal restraint has contributed to easing inflation across the region,” the AfDB analysts say.
The bank estimates that average inflation will mellow slightly to 6.1 percent this year from 6.8 percent in 2012.
Furthermore, strong adherence to institutional and structural reforms is boosting growth and development efforts in the region.
“Going forward, Southern African countries need to maintain the adherence to strong macro-economic and structural reforms as the key to accelerated and inclusive growth. In particular, the development of a dynamic private sector remains essential to accelerated and sustained growth,” the AfDB said.