IMF says sub-Saharan Africa faces heightened risk of capital outflows

NAIROBI (Reuters) - Investment in infrastructure and natural resources will continue to underpin economic activity in sub-Saharan Africa, although capital outflows sparked by tighter global financial conditions pose a risk to growth, the IMF said on Thursday. Inflation looks set to remain contained in most countries, it said. "The main downside risk to this generally positive baseline scenario is the risk that growth in emerging markets might slow much more abruptly than currently envisaged," the International Monetary Fund said in its latest Regional Economic Outlook. "As advanced economies tighten their monetary policies, frontier market economies will also face higher funding costs and a heightened risk of reversal of capital flows," it said. The IMF forecasts economic growth of 5.5 percent for sub-Saharan Africa this year, up from 4.9 percent last year. That is slightly more optimistic than the World Bank, which projects sub-Saharan Africa's output will grow 5.2 percent this year, partly driven by rising household spending. [ID:nL6N0MZ2WN] Africa, the world's poorest continent, needed to ensure growth was more inclusive, the IMF said, citing Mozambique where although the economy has expanded at the same pace as Vietnam, poverty has declined far more slowly. The fund said it expected growth in Nigeria - now the region's biggest economy after a rebasing - to quicken as oil production picked up after recent supply disruptions. It said South Africa, now ranked second largest and which suffered anemic private sector investments in 2013 and mining strikes which persist, will post modest growth this year as demand picks up in its main advanced economy trading partners. Inflation in the region will accelerate to an estimated 6.2 percent in 2014 from 5.9 percent last year, before easing slightly in 2015, though currency depreciations may lead to renewed upward price pressures, the IMF said.