Africa's 'oil price winners' face mixed prospects

Subject

Africa's oil price winners.

Significance

Despite traditionally being winners during periods of oil price decline, the medium-term outlook is mixed for sub-Saharan Africa's (SSA) oil importing countries -- reflected in the IMF's recent downgrade of its SSA outlook from 5.75% to 4.9%. Short-term gains reduce the fuel import bill, but uncertainty looms over energy investments in eastern African, while idiosyncratic risks cloud the outlook for southern Africa. While oil exporters may also reap some benefits, much will depend on the degree of oil dependency, political space to make the necessary policy retrenchments, and the extent of government financial buffers.

Impacts

• If sustained, low oil prices could provoke civil unrest, rather than reforms, in oil exporting countries.
• Most oil exporters will struggle to maintain macroeconomic stability if oil remains low for more than a year.
• However, economic diversification to some degree helps to shield the region from sharp global slowdowns.