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Africa's Macroeconomic Performance and Prospects

Africa's Macroeconomic Preformance and Prospects

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Africa's economic growth continues to strengthen, reaching an estimated 3.5 percent in 2018. This is about the same rate achieved in 2017 and up 1.4 percentage points from the 2.1 percent in 2016. In the medium term, growth is projected to accelerate to 4 percent in 2019 and 4.1 percent in 2020. And though lower than China's and India's growth, Africa's growth is projected to be higher than that of other emerging and developing countries.

The recent commodity price rebound supported the recovery of commodity-exporting countriesThe  recovery  in  growth  since  2016  among  Africa's  commodity  exporters  has  been  driven  by  the rebound in commodity prices. Over the  past  two  years  the  price  of  Brent  crude  oil  has risen about 177 percent (from a 10-year low of  $27.45  in  February  2016  to  $74.34  in  Octo-ber 2018). This has helped oil exporters (notably Algeria,  Angola,  Chad,  Congo,  Gabon,  Libya,  and Nigeria) recover but also pushed up inflation in  oil-importing  countries.  

North Africa leads the growth recovery, but East Africa remains the most dynamic region of  Africa's  projected  4  percent  growth  in  2019,  North  Africa  is  expected  to  account  for  1.6  per-centage  points,  or  40  percent.  But  average  GDP  growth  in  North  Africa  is  erratic  because  of  Libya's  unstable  development.  After  declining for three years, Libya's GDP increased in 2017 and 2018 because of higher oil production.

Growth is driven by improved tourism and manu-facturing production and a more expansive fiscal policy.  Unlike  other  main  commodity  exporters,  Algeria weathered the commodity price shock in 2015 and 2016 through expansionary fiscal policies; growth is expected to weaken in 2019 and 2020.  Morocco's  growth  has  been  boosted  by  agricultural  production  and  extractive  industries  and  supported  by  accommodative  monetary  policy,  as  inflation  remains  low.  Egypt’s  growth  remains positive, and its stabilization program is now paying off. Growth is driven by the return of investor  confidence,  private  consumption,  and  higher exports, which have benefited from adjust-ments in the real exchange rate.

East Africa, the fastest growing region, is pro-jected  to  achieve  growth  of  5.9  percent  in  2019  and 6.1 percent in 2020. Between 2010 and 2018, growth averaged almost 6 percent, with Djibouti, Ethiopia, Rwanda, and Tanzania recording above-average rates. But in several countries, notably  Burundi  and  Comoros,  growth  remains  weak due to political uncertainty. In South Sudan, GDP continues to fall due to political and military conflicts and because the 2015 peace agreement has not been implemented.

West Africa saw high growth until 2014, but an economic  slowdown  followed  due  to  the  sharp  drop  in  commodity  prices  and  the  Ebola  crisis.  Nigeria,  Africa's  largest  economy  and  largest  oil  exporter,  fell  into  recession  in  2016.  Its  gradual  recovery in 2017 and 2018, helped by the rebound of  oil  prices,  is  restoring  growth  in  the  region.  Other countries— including Benin, Burkina Faso, Côte d'Ivoire, Ghana, Guinea, and Senegal— have seen growth of at least 5 percent in the past two years and are projected to maintain it in 2019 and 2020.

Growth  in  Southern  Africa  is  expected  to  remain moderate in 2019 and 2020 after a modest recovery in 2017 and 2018. Southern Africa's sub-dued growth is due mainly to South Africa's weak performance,  which  affects  neighboring  countries. Low public and private investment and risks of lower sovereign credit ratings are weighing on growth in the region. In Botswana, growth accel-erated due to improved diamond trade, services and  investment,  the  recovery  of  agriculture  after  the  drought,  and  the  expansionary  fiscal  policy  and  accommodative  monetary  policy  resulting  from moderate inflation. Mauritius also continues its  steady  growth,  driven  mainly  by  strong  con-sumption and higher exports, including tourism.

At  the  country  level,  slow  growth  in  Nigeria  and  South  Africa  is  dampening  Africa's  average  growth.  They  account  for  a  large  share  of  Afri-ca's  GDP  but  only  0.2–0.4  percentage  point  of  Africa’s  GDP  growth.  Ethiopia, continuing on a high growth path, accounts for about 0.2 percentage point more than South Africa, despite accounting for a smaller share of Africa’s GDP. Egypt, the third largest African econ-omy, accounts for more than 1 percentage point of Africa's growth.

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