Yemisi Izuora with Agency Report
Africa’s economic outlook looks promising as the continent in 2016 maintained its position as the world’s second-fastest growing economy behind South Asia, according to data released by the African Development Bank (AfDB).
The Bank tabled this report titled, Financial Presentation, at the recently held annual meetings in Ahmedabad, India.
The report said Foreign Direct Investment increased slightly reaching $56.5 billion in tune with growing urbanisation and cities growing with consumer markets increasingly targeted by foreign investors.
Official development assistance, which remains the most important source of public finance, declined by 1.7 per cent.
Remittances mainly by the African diaspora represent a key source of capital for African countries totaling $64.6 billion in 2016, the report says.
According to the AfDB, the report analysed Africa’s economic outlook, Bank operations, financial profile and capital market activities, noting that the continent recorded an average of 2.2 per cent GDP growth in 2016 compared to 7.1 per cent posted by South Asia powered India against a 2 per cent average for the developed economies.
“Although natural resources and primary commodities are still major drivers, their importance has declined while domestic factors including consumption demand play an increasing role,” AfDB senior Vice-President, Charles Boamah, said during the presentation.
Boamah also highlighted that other factors include improved supply conditions and good business environment, prudent macroeconomic management, favourable external financial flows, and high public spending.
The report notes that while natural resources and primary commodities remain major growth drivers, their importance has declined, while domestic factors including consumption demand now play a greater role.
East Africa emerged the best sub-regional performer with a 5.3 per cent real GDP growth average driven by strong performance in Ethiopia, Tanzania and Djibouti.
North Africa followed with an average 3.3 per cent growth driven by recoveries in Egypt (4.3%) and Algeria (3.5%), amidst persistent political uncertainties.
Southern Africa recorded a 1.1 per cent average due to the poor performance of South Africa and Angola, two major commodity exporters in the sub-region hit by drought, persistent power outages and adverse terms-of-trade shocks, while Madagascar and Mozambique were rare bright spots, posted growth rates above 4 per cent.
Central Africa followed with a 0.8 per cent average due to low commodity prices while some countries like Cameroon proved resilient. The Central African Republic and São Tomé and Príncipe improved their economic performances, the reported noted.
At the bottom was West Africa, averaging a 0.4 per cent growth rate despite good performances by Côte d’Ivoire and Senegal, which were cancelled out by recession and socio-political factors that bogged down the economy to 1.5 per cent growth.
The report also noted that Nigeria and South Africa account for the largest share of Africa’s GDP with 29 per cent and 19 per cent, respectively.
However, the facts on the ground suggest that these resources are insufficient to fully meet the continent’s development challenges.
On a positive note, the Bank estimates that its High 5 priorities; consisting of Light up and Power Africa, Feed Africa, Industrialise Africa, Integrate Africa, and Improve the quality of life for the people of Africa – would spearhead Africa’s economic diversification and growth in broad-based economic opportunities that will shield the continent from future commodity shocks and enhance their resilience.
“Growth prospects would further be boosted by expected increases in commodity prices, strong domestic demand, better macroeconomic governance and an improved business environment,” said co-presenter and acting vice-president for finance, Hassatou N’Sele.
On the other hand, the report also cited rising debt, structural weaknesses, power outages, climate change, conflict, political instability and terrorism among some of the downside risks which should not be ignored.