Africa’s medium term growth prospects positive, as world economy strengthens

Africa maintained an average growth rate of about 4% in 2013, compared to 3% for the global economy, underscoring the continent’s resilience to global and regional headwinds.

According to the 2014 African Economic Outlook, a report produced by African Development Bank (AfDB), the OECD Development Centre and the United Nations Development Programme, growth performance varied widely across country classifications and regions.

Growth in sub-Saharan Africa was 5% in 2013 and is projected to be 5.8% in 2014. Excluding South Africa, the figures are 6.1% and 6.8%, respectively. East and West Africa recorded the fastest growth in 2013, 6% or above. Furthermore, growth in low-income countries, at 6% or above, exceeded that of upper-middle-income countries in North and Southern Africa at below 3%. Africa’s medium-term growth prospects look good.

Africa’s average growth is projected to accelerate to close to 5% in 2014 and 5%-6% in 2015, thus to levels last seen before the onset of the 2009 global recession. This forecast is based on the premise of a gradual strengthening of the world economy and also on improvements in political and social stability in those African countries currently affected by conflicts. But if the global economy should remain weak, or if political and social tensions within Africa were to improve less than assumed, growth would be lower than projected, the report states.

Inflationary pressures have eased in many countries as energy prices have stopped rising and food prices have declined. These developments, together with prudent fiscal policies,have provided some scope for monetary policy to reduce interest rates. But in other countries where fiscal policy has been lax and where currencies have weakened, monetary policy has tightened to stem inflationary pressure.

Africa’s exports to the rest of the world grew faster than those of any other region in 2012, but they remain dominated by primary commodities and accounted for only 3.5 percent of world merchandise exports in 2012.

Avoiding that trap involves investing in new and more productive sectors, building skills, creating jobs and acquiring new technology, knowledge and market information. These interventions require sound public policies, as well as entrepreneurs that are willing and capable of helping achieve these gains.

The report uses the example of South Africa, which achieved a remarkable turnaround in its automotive industry by removing obstacles and providing incentives for component producers and assembly lines. It also shows that the development of agribusiness value chains in countries such as Ghana, Kenya and Ethiopia has contributed to economic growth and job creation.