The October 2024 Regional Economic Outlook for Sub-Saharan Africa (SSA) has announced that macroeconomic imbalances are gradually easing in the region, thanks to policy adjustments. Inflation has declined in many countries, but challenges remain. International bond markets have reopened. Exchange rate pressures have partially eased since January 2024. Growth is expected to pick up modestly in 2025 (delayed but broad-based recovery next year, driven by expectations of less-frequent blackouts, macroeconomic stabilization, and more accommodative monetary policy), but with significant heterogeneity and divergent long-term patterns (resource vs. non-resource-intensive countries). The Per capita income growth is insufficient to improve living standards and there is little convergence with global income levels.

Risks to the outlook are tilted to the downside and include intensifying climate shocks, mpox spread, volatility in commodity prices, slowdown in advanced economies, volatile financial markets. Volatile financial markets could lead to higher sovereign risk premia. An analytical scenario built by IMF staff shows that a 150-bps increase in SSA countries’ sovereign risk premia could lead to a 0.7 percentage point decline in GDP in 2025-2026; a sharp fall in private investment (-5.2%); and a 0.7 percentage point increase in policy interest rate.

In Seychelles, real GDP growth for 2024 has been revised down to 3.0 percent (compared to 3.7 percent in June 2024). This reflects lower tourist arrivals in the wake of a temporary reduction in the number of direct flights and a decline in average spending per tourist. Some recovery is expected in the last quarter of 2024. Year-on-year inflation was about 0.6 percent as of September, reflecting stable utility rates and stable or declining prices for fuel and other commodities. 

Policy makers in the SSA region face with difficult tradeoffs: (i) macroeconomic stability is essential, (ii) elevated development needs (infrastructure, health, education) require additional financing and (iii) social frustration and political pressures, require better use of public resources. The region has increasingly witnessed political fragility and social unrest on the back of structural weakness as people express discontent over increasing hardships, including excessive living costs.     

Monetary policy is likely to vary across the region. While most countries in the region have been “on pause,” several have tightened in 2024. Countries with still-elevated inflation may require further tightening. Those with near-target inflation can gradually ease to a more neutral stance, in close cooperation with other policies.   

Challenging policy tradeoffs arise as public finances require further consolidation amid elevated spending needs. In such a context it would be important to tackle debt vulnerabilities, reduce fiscal slippages, including through domestic revenue mobilization, boost credibility, and strengthen the medium-term fiscal frameworks.

Making reforms more socially acceptable requires a multipronged approach: (i) a use of fiscal policy to promote inclusion, (ii) a focus on communication and consultation strategies, (iii) an appropriate design and sequencing of reforms, (iv) a complementary and compensatory measures (e.g., social protection), and (v) a fair and transparent management of public resources.

International assistance to the region has decreased, while the International Monetary Fund (IMF) has intensified its engagement, stepping up support in the region. More than $60 billion have been disbursed since 2020, over $5 billion disbursed in 2024, so far and 26 countries have ongoing IMF financing arrangements; of these, 11 countries have a Resilience and Sustainability Facility. The Fund program design and performance is increasingly constrained by a declining Official Development Assistance and a limited and expensive market financing terms, making it harder to strike a balance between adjustment and financing.