AFRICA’S economic outlook improved in 2017 compared with 2016 and is expected to gain momentum in 2018. GDP growth in 2017 is expected at 3 percent up from 2.2 in 2016 and projected to expand to 3.7 percent in 2018, the African Development Bank (AfDB) said in an updated forecast released in Abidjan mid-October.
‘The changes in previous forecasts released in the African Economic Outlook in May 2017 followed the release of new data by some key countries –Nigeria, Algeria, and Egypt– which account for some 50 percent of the continent’s GDP and which revised their 2017 and 2018 forecasts downwards,’ said Abebe Shimeles, acting Director, Macroeconomics Policy, Forecasting and Research.
However, the continent’s averages compare favourably with global economic growth projections of 3.5 percent and 3.6 percent GDP growth in 2017 and 2018, respectively.
The new set of data attributes Africa’s economic rebound mainly to the recovery in the global economy and bottoming out of the commodity price bust that had set in since 2014. ‘Economic diversification and drive for structural transformation need to proceed with urgency and intensity in order to avoid the repeat of boom-bust cycle in the wake of commodity price volatilities,’ the African Economic Outlook already warned in May 2017.
Steady domestic demand and public investments in infrastructure also helped sustain growth in many countries, the forecast said, adding that beyond accumulation of physical capital, productivity of those investments is important for sustainable growth and must remain an area of policy focus.
Fiscal and current account deficits are expected to narrow due to strong export performance and higher government revenues but African governments must resist the temptation to ‘catch-up’ on the spending that was suspended in the last two years as this will exuberate deficits.
In regional terms, East Africa remains the fastest growing region, with an estimated growth of 5.1 percent in 2016 projected to grow by 5.4 percent and 5.8 percent in 2017 and 2018 respectively. Growth in the Eastern Africa region is mainly driven by strong domestic demand and high public infrastructure spending.
North Africa recorded the second highest growth rate of 3.1 percent in 2016 buoyed by the recovery in Egypt, with output growth of 4.3 percent and Algeria at 3.3 percent. The northern region is expected to grow by 3.1 percent and 3.6 percent in 2017 and 2018 respectively, with expected pick up of growth in Morocco of 4.5 percent in 2017 and 3.9 percent in 2018. The Bank warns, however, that continued political uncertainties and reduced oil production in Libya continue to drag growth in the North Africa region. Libya is projected to stay in the negative growth territory in 2017 and 2018 with a growth of -4.9 percent and -3.9 percent respectively.
Growth in Southern Africa remained tepid at 0.9 percent in 2016, down from 1.6 percent in 2015. Projected improvements in the performance of South Africa from 0.3 percent in 2016 to 1.2 percent and 1.3 percent in 2017 and 2018 is expected to boost the Southern Africa regional growth to 2 percent to 2.3 percent in 2017 and 2018 respectively attributed to increased mining output following moderate rise in commodity prices.
Similarly, Central and West Africa regions, dominated by oil producers, growth were severely constrained at 0.5 percent and 0.4 percent, respectively in 2016. In West Africa, the economic recession in Nigeria completely offset the strong gains made in Sierra Leone, Togo, Cote d’Ivoire and Senegal, the latter two being the region’s fastest growing economies. Nigeria accounts for 72.4 percent of the region’s overall GDP but contracted by -1.5 percent in 2016 against an average expansion of 6 percent for the other four economies, which collectively account for about 10 percent of regional GDP.
West Africa is expected to record improvements in growth to 2.5 percent and 4 percent in 2017 and 2018 respectively mainly attributed to improvements in oil production in Nigeria and rising global commodity prices. Central Africa on the other hand was mainly slowed down by poor performance in Equatorial Guinea and Chad which contracted by -7.3 percent and -6.4 percent, respectively followed by Republic of Congo which shrunk by -2.4 percent. Central Africa republic is expected to record improvements in growth in 2017 and 2018 of 1.6 percent and 3.1 percent in the two respective years, the report says.