Sudan Economic Outlook
- Driven by agriculture and the extractive industries, GDP growth (3.4% in 2014) is projected at 3.1% in 2015 and 3.7% in 2016, with inflation anticipated to remain high (21.8% in 2015).
- National dialogue between government and opposition should lead to political reform, while implementing the Interim Poverty Reduction Strategy Paper should support inclusive growth and improve MDG achievement prospects.
- Geographic concentration has hindered business clustering and employment in lagging states, and specific spatial planning is needed to concentrate resources in urban agglomerations and stimulate employment in agriculture.
Growth of Sudan’s gross domestic product (GDP) has been estimated at 3.4% in 2014 and is projected at 3.1% and 3.7% in 2015 and 2016, respectively. GDP should be driven by rain-fed agriculture, minerals and oil-transit fees. Domestic services grew by 3.1% and accounted for 45.6% of GDP in 2014. Services, however, typically provide low-productivity jobs. Inflation in Sudan, the highest in Africa and averaging 36.9% in 2013-14, is due to exchange-rate devaluations, unsterilised gold purchases and supply disruptions owing to civil conflicts. Although it is projected to drop to 21.8% in 2015 on the back of a tight policy stance, build-ups of inflationary pressures will increase the already high rates of poverty and unemployment. In the short and medium term, growth will be sustained by the revitalisation of agriculture and increased production of mineral and nonmineral exports, in addition to restraining inflation.
A new IMF Staff-Monitored Program (SMP) and a five-year programme of economic reform (FYPER, 2015-19) were adopted in 2014, aimed at enhancing macroeconomic stability and sustaining inclusive growth. Policy makers must nonetheless face challenges stemming from the structural weaknesses of the economy and limited market penetration. The slow growth of credit to the private sector due to low financial intermediation and the crowding-out effects of fiscal operations have further restrained the formalisation of business and job creation. Refusal, since 2014, of foreign correspondent banks to process transfers to and from Sudan in order to avoid violating US sanctions has tightened the foreign-exchange market and raised the costs of imported inputs. In this respect, effective outreach is needed to remove the US sanctions. Additionally, Sudan’s heavy external debt and volatile internal and external political environments could effectively weaken progress towards meeting the Millennium Development Goals (MDGs).
Urbanisation in Sudan has been propelled since the 1990s by worsening conditions in the rural areas and protracted civil conflicts. This has led to the development of slums and camps for the internally displaced, housing shortages in many cities and the proliferation of informality. Absence of a strategy for co-ordinating land use within the national development planning process has contributed to excessive urban growth lacking in structural transformation and specialisation. A specific spatial strategy is needed to focus on maximising the benefits of existing urban assets in order to spread entrepreneurial opportunity, while reviving the rural economy in order to reduce the potential risks and backlash related to economic clustering.