African economies registered 3.9% average GDP growth in 2014 compared to the 3.7% in 2013. This reflects resilience to global and regional shocks which affected the continent last year, according to the African Development Bank Group's Annual Report, which was released Wednesday, May 27 in Abidjan.
Despite the negative impacts of low commodity prices, the Ebola epidemic in West Africa as well as the fundamentalist and military insurrections witnessed in many countries, the continent achieved considerable growth, but with sharp variations between regions and countries.
In relative terms, Africa's economic growth was higher than the 3.3 percent global average in 2014. Western Asia recorded 2.9 percent, while Latin America and the Caribbean grew by 1.2 percent. Africa, however, grew slower than the emerging markets and developing economies of the world, which registered 4.4 percent growth.
Regional Variations
East Africa emerged as the best performer with a 7.1-percent average GDP growth. Ethiopia, Rwanda, and Tanzania outstandingly grew at 10.3, 6.1, and 7.1 percent, respectively. West Africa followed with growth averaging 6.0 percent, a commendable performance in the light of conflicts in the region, the Ebola crisis, and the decline in oil prices. Nigeria, which rebased its economy earlier in the year, posted a 6.3 percent growth.
Central Africa recorded an average of 5.6 percent, reflecting considerable resilience to shocks, including military insurrections and the decline in oil prices. Gabon, which grew at 5.1 percent, saw the expansion in non-oil sectors, especially timber processing, making up for the fall in oil prices, while the main drivers of the 8.9 percent growth in the DRC were mining, agriculture and infrastructure investment.
North Africa continued to recover from the slump in previous years, recording an average growth of 1.7 percent in 2014, compared with 1.6 percent in 2013. While Algeria witnessed a resurgence of growth to 4 percent, from 2.8 percent in 2013, Morocco recorded 2.7 percent, from 4.7 percent in 2013. At 2.2 percent, Egypt's growth remained stable. Tunisia's relatively smooth political transition was an important factor in the country's modest 2.4 percent growth from 2.3 percent in 2013. Instability in neighbouring Libya (with -19.8 percent growth), however, remains a notable downside risk for Tunisia.
Southern Africa, which recorded 2.7 percent growth, from 3.6 percent in 2013 remained sluggish. South Africa, the region's largest and most influential economy, which had to contend with structural bottlenecks, strained industrial relations, and low investor and consumer confidence, posted a 1.5 percent GDP growth from 2.2 percent in 2013. Growth in other countries in the region was substantially higher. With growth at 7.6 percent, compared with 7.4 percent in 2013, Mozambique continued to be the region's fastest-growing economy, driven by foreign investment in mineral, gas and oil prospecting. Similarly, Zambia and Malawi posted impressive growth rates of 5.7 percent each, (from 6.7 and 6.1 percent, respectively, in 2013). Namibia's economy grew at 5.3 percent from 5.1 percent in 2013.
A few countries, including Ghana, Zambia, and Nigeria, experienced significant macroeconomic imbalances in 2014. In Ghana and Zambia, exchange rates depreciated sharply, stoking a rise in inflation, from 11.7 percent in 2013 to 17.0 percent in 2014 for Ghana, and from 7.0 percent in 2013 to 7.9 percent in 2014 for Zambia. Due to concerns over deteriorations in their fiscal positions, both countries were downgraded by international credit rating agencies.
External Financing
Africa's resource-rich countries received the bulk of the inflows, suggesting that natural-resource endowments remain a major attraction for FDI to Africa. External financial flows to Africa in 2014 grew to a record US $200 billion, some four times the figure for the year 2000. FDI was at US $60.4 billion, up from US $57.2 billion in 2013. The principal recipients of this FDI were Nigeria (US $6.5 billion), Morocco (US $4.8 billion), South Africa (US $4.8 billion), and Mozambique (US $4.1 billion). Remittances from the African Diaspora, the largest source of foreign financial flows to the continent, rose by more than 10 percent to US $67.1 billion. Here, middle-income countries were the major beneficiaries, reflecting differences in the profiles of Africa's diaspora. Meanwhile, official development assistance (ODA) was estimated at US $55.2 billion, marginally lower than the US $55.8 billion recorded in 2013. This decline reflects a trend that began in 2000. However, ODA remains the largest single source of external financial flows to Africa's low-income countries.
Future Prospects
According to the report, future economic growth in most African countries will be driven by domestic demand, supported by investments in the natural resources sector, increased investment in infrastructure, and expansion in the agricultural sector. The medium-term growth prospects for the continent remain favourable as growth is projected to accelerate to 4.5 percent in 2015 and to 5.0 in 2016. East Africa is expected to register 5.6 percent growth in 2015, accelerating to 6.7 percent in 2016. Central and West Africa are expected to grow by 5.5 percent and 5.0 percent, respectively, in 2015, rising to 5.8 percent and 6.1 percent, respectively, in 2016. North Africa is projected to grow at 4.5 percent in 2015, a significant increase from the 1.7 percent it achieved in 2014. Southern Africa is forecast to grow by 3.1 percent in 2015, up from 2.7 percent in 2014.
SOURCE African Development Bank (AfDB)