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African economic growth to continue upward trend
Strong growth in Africa’s gross domestic product is expected to continue in 2008 and 2009, according to Louis Kasekende, the chief economist at the African Development Bank (AfDB).
Kasekende was speaking here on Sunday at the launch of the seventh edition of the "African Economic Outlook", a report on the health of the continent’s economy, compiled by the AfDB, the United Nations Economic Commission for Africa (ECA) and the Organisation for Economic Cooperation and Development (OECD).
The launch was one of the preparatory events prior to the AfDB group’s annual meetings scheduled for Wednesday and Thursday here.
Kasekende put Africa’s overall growth rate at 5.7 per cent in 2007 and predicted it would rise to 5.9 per cent this year, a rate that would remain steady in 2009.
It was particularly encouraging that growth in 31 African countries is expected to be higher than five per cent this year, compared with 25 countries where the GDP grew by more than five per cent in 2007.
Last year, 13 countries had growth rates of between three and five per cent and in 2008 that figure was predicted to reach 16.
In a masterpiece of understatement, the report remarked that some countries "continued to face serious problems, including the humanitarian catastrophe in the Darfur region of Sudan, economic collapse in Zimbabwe, conflicts and political unrest in Chad, Kenya and Somalia, which are likely to dampen their growth prospects."
Kasekende noted that rises in the price of oil and other commodities have brought "windfall gains" to those African countries who are net exporters of these goods, while net importers "have suffered."
Indeed the report originally took a complacent attitude to oil prices. The assumptions on which its forecasts are based included a prediction that oil prices would stabilise at around US$90 a barrel.
This assumption was so out of line with reality that an Addendum to the report had to be hastily published admitting its assumptions were "plausible but optimistic" and "subject to significant downside risk."
The most ominous such risk is the soaring price of oil and grain, leading to "increased inflationary pressure, which is threatening fiscal stability and worsening the balance of payments in food importing countries."
Bad news for consumers might be good news for African food producers - but the Addendum warned "for persistently higher commodity prices to translate into increased output and contribute to GDP growth, agricultural reforms need to be accelerated."
Could Africa also suffer from the "sub-prime crisis" in the United States (the euphemism economists use for the deranged lending polices which have wrecked the US housing market and whose effects are rippling through the international finance system).
Here the report’s authors claim that Africa "appears to have been largely cushioned from the first round effects of the financial market turbulence due to the limited integration of African economies in the global financial markets."
Furthermore, Africa was now less vulnerable to a banking liquidity squeeze, because debt levels have fallen sharply and most countries now have their exchange rates "set at more realistic levels."
Barfour Osei, the ADB’s Chief Research Economist, pointed out that when the continent’s forecast growth is broken down by region, the southern African growth rate is likely to decline in 2008, when compared with 2007.
This is largely because of an expected slowdown in the South African and Angolan growth rates.
Angola has been growing at an average of 11.8 per cent a year between 2000 and 2007 and so a slowdown is hardly surprising.
The Mozambican growth rate (7.2 per cent in 2007) is expected to hold steady.
An obvious cleavage is between net oil exporters and net oil importers.
The oil exporters had an average growth rate of 6.4 per cent in 2007, expected to rise to 6.8 per cent in 2008.
The average growth rate for the net importers, however, is predicted at five per cent.
The problem with the oil exporters is that their economies tend to be excessively dependent on oil - the ten least diversified economies in Africa in 2007 were all oil exporters.
Osei noted that Africa had seen record foreign direct investment of US$ 836 billion in 2007.
But while investment has risen sharply, foreign aid has not, despite all the promises made at successive summits of the G8 group of most industrialised nations.
Osei pointed out that since 2004, some 70 per cent of the rise in aid to Africa has been either humanitarian aid or debt relief.
Development aid has not risen in line with the speeches made by western leaders.