Economic Outlook: Africa
Under the theme “Delivering on Africa’s Promise”, the 23rd World Economic Forum (WEF) on Africa will provide an important platform for regional and global leaders from business, government and civil society to deepen the continent’s integration agenda and renew commitment to a sustainable path of growth and development.
Over the past quarter, we have downwardly revised our forecast for the real GDP expansion of sub-Saharan Africa in 2013, 2014 and 2015. But to be clear, the overall trend is still positive, with real GDP growth increasing every year up to 2015, after which we expect the growth figure to remain at the same level in 2016.
Overall, our forecasts indicate that economic growth in the sub-Saharan African (SSA) region will reach 5.55% in 2013, 5.6% in 2014, and 5.65% in 2015, from an estimated expansion of 5.15% in 2012. Removing the dragging effect of South Africa from the equation, the economic growth rates move to a higher platform, averaging around 6.5% p.a. over the medium-term (2013-16).
The downwardly revision for SSA growth has been driven by a more bearish outlook for the expansion of Africa’s largest economy, South Africa, and also a slightly more subdued outlook than previously projected for the region’s second-largest economy, Nigeria. During 2013 South Africa will face continued labour market tension as minimum wages paid to farm workers are pushed through, some multi-year remuneration agreements in the mining sector come to an end, and municipal workers contend with a moderate salary hike promised to them by the 2013/14 fiscal budget speech. Although Nigeria’s economy is expected to grow by nearly 7% p.a. over the medium-term, supported by reforms in the banking, energy, and agricultural (i.e. non-oil) sectors, growth in the oil economy is expected to remain weak, especially over the short-term.
An uncertain global environment
The main risks to our projections for economic growth in the region relate to an uncertain global environment, a euro zone recession, and high political risk in certain pockets of the region such as Central Africa. Indeed, a more bearish outlook for the euro zone, an important trade partner of SSA, but also a source of foreign direct investment (FDI) and tourism earnings for the region, are some of the reasons for our cautious outlook.
There are however also individual country-specific reasons for the revisions in our outlook. In this regard, Uganda comes to mind. While there are indications that Ugandan economic activity started to pick up in the early stages of the 2012/13 fiscal year (July/June), the short-term outlook for economic growth remains unclear. This is mainly due to economic uncertainties arising from recent corruption concerns and the resultant cutting and/or suspension of donor aid, amidst a weak external position.
Uganda also remains a key regional player in terms of unfolding developments in the Central African Republic (CAR) and in the Democratic Republic of Congo (DRC) with the clear and present danger that Kampala may be dragged deeper into DRC conflicts than it wants to or can afford.
Elsewhere, in Kenya, a peaceful vote in the recent (March) election followed by the Supreme Court process that confirmed Uhuru Kenyatta’s narrow win will have appeased investors and will cement the country’s ability to attract FDI, and will also be positive for the East African region as a whole.
Elsewhere, North Africa is struggling to return to the high levels of economic growth seen before the Arab Spring uprisings broke out early in 2011. Both political uncertainty and weak foreign demand in the euro zone are hampering economic activity in the region.
The Egyptian economy, in particular, is in strife, and desperately needs to implement fiscal austerity measures and secure an International Monetary Fund loan in order to boost investment and prevent a further deterioration in its fiscal and external balances.
We project that, excluding Libya, the region will grow by around 3.1% in 2013, up from around 2.5% in 2012. Libya is estimated to have expanded by 111% last year and forecast to grow by another 14.2% in 2013 as the economy moves closer to pre-war output levels. Most of the country’s oil and gas facilities are operational again, though we expect foreign companies to remain wary of investing in the country until security and economic policy issues are resolved.
Apart from Libya, Morocco is expected to be the best-performing economy in the region over the next two years.Share your opinion on this Economic Outlook: Africa overview below. For more, read our Economic Outlook: Global article and view our World Economic Forum content
About David Okwara
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