Africa: improving short-term outlook but with significant medium-term vulnerabilities
Africa’s economic growth is projected to increase slightly from 3.2 per cent in 2018 to 3.4 per cent in 2019 and 3.7 per cent in 2020. This moderate acceleration isexpected to be supported by external factors, including a strengthening of global demand for Africa’s products, and domestic factors, such as robust private consumption, sustained investments in infrastructure, and rising oil production, particularly due to new field development. Inflation is estimated to have declined in 2018 and should fall further in 2019 due to improving agricultural and food production as well as stable exchange rates in most countries.
Despite a robust investment-to-GDP ratio of about 25 per cent, GDP growth in Africa remains well below what is needed to reach many Sustainable Development Goals (SDGs) targets and keep pace with rapid population growth. Per capita income growth for the continent has modestly improved from the contraction in 2016; however, at only 0.6 per cent in 2018 and 0.9 per cent projected in 2019, it remains insufficient to significantly improve living standards of large segments of the population. Overall, Africa needs to at least double the current growth rate in order to make significant progress towards achieving the SDGs. Furthermore, inequality levels in the continent remain high and slow moving. Only a few African economies have achieved significant improvements in income distribution between 2000–2004 and 2012–2016. Out of 25 economies for which data is available, only 4 countries (located in West Africa) have seen the share of those in the bottom 20 per cent of income distribution increase by 2 percentage points or more.
By contrast, over the same period, the income share held by those in the top 20 per cent of income distribution has risen by at least 2 percentage points in 7 economies. In Zambia, this share jumped by almost 9 percentage points. This implies that the gains from GDP growth will likely remain very unequally distributed in many countries.
The overall fiscal position continued to improve, with the fiscal deficit narrowing slightly in 2018, mainly due to ongoing fiscal consolidation efforts in many countries. The fiscal position is forecast to remain stable in 2019, supported by rising export revenues, particularly from natural resources.
Africa’s overall current account deficit narrowed in 2018. The improvement was underpinned by several factors, such as improvements in commodity prices and production, but counterbalanced by, inter alia, capital and food imports. The economic performance varied significantly across the five subregions in 2018. East Africa continues to be the fastest-growing subregion in Africa with a 6.2 per cent growth rate driven by government spending on infrastructure and domestic demand. North Africa expanded by 3.7 per cent, with economic activity driven by improvements in tourism revenues and rising agriculture production. West Africa, led by the Nigerian economy, grew by 3.2 per cent due to the increase in oil revenue. Meanwhile, economic growth of the Southern African subregion deteriorated slightly from 1.5 per cent in 2017 to 1.2 per cent in 2018, and remains adversely affected by the economic performance of South Africa. After two challenging years, Central Africa achieved a 2.2 per cent growth rate in 2018, exiting recession of -0.2 per cent in 2017.
Source : un.org