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African Economic Outlook 2019: Growth acclerates

Africa’s economic growth (measured by gross domestic product, GDP) is set to accelerate to 4.0% in 2019 and 4.1% in 2020. The good news comes in the African Economic Outlook 2019, published recently by the African Development Bank.

Bank President Akinwumi Adesina says in the foreword: “The state of the continent is good. Africa’s general economic performance continues to improve.. (but) it remains insufficient to address the structural challenges of persistent current and fiscal deficits and debt vulnerability.”

Growth was 3.5% in each of 2018 and 2017, up from 2.1% in 2016.

The 2019 report focuses on three topics
• Africa’s macroeconomic performance and prospects
• Jobs, growth, and firm dynamism
• Integration for Africa’s economic prosperity.

Bank Director of Macroeconomic Policy Forecasting and Research Department, Hanan Morsy notes that, in spite of a rising national debt across Africa, “there is no systemic risk of debt crisis.”

12m jobs
Adesina says industry should lead this growth: “Macroeconomic stabilization and employment outcomes are better when industry leads growth, suggesting that industrialization is a robust path to rapid job creation. However, African economies have deindustrialized.

“Although structural change is occurring, it has been through the rise of the services sector, which has been largely dominated by informality, low productivity, and an inability to create quality jobs. To avoid the informality trap and chronic unemployment, Africa needs to industrialize and add value to its abundant agricultural, mineral, and other natural resources.

According to the report, Africa needs to create at least 12 million jobs a year to stop unemployment from rising further. Unemployment is already a key cause of instability in many African countries, particularly as the growing youth population gathers in cities, Morsy said at the launch last month: “Manufacturing-driven growth has the highest impact on job creation.”

Regional integration and the continental free trade area
The African Economic Outlook 2019 report focuses on regional integration for trade and economic cooperation and on delivery of regional public goods. It analyses gains of regional public goods, including synchronizing financial governance frameworks, opening regional aviation to competition, and facilitating the free movements of people, goods, and services through open borders.

“Borderless Africa” is a key foundation of a competitive continental market to become a global business centre. This includes developing cross-border supply chains, improving customs management and adopting simple and transparent rules of origin.

The report identifies 5 key trade policy actions that could potentially bring Africa’s total gains to 4.5 percent of its GDP, or $134 billion a year:

  1. Eliminate all applied bilateral tariffs in Africa
  2. Keep rules of origin simple, flexible, and transparent
  3. Remove all nontariff barriers on goods and services
  4. Implement the World Trade Organization’s Trade Facilitation Agreement to reduce cross border time and transaction costs tied to non-tariff measures
  5. Negotiate with other developing countries to reduce their tariffs and nontariff barriers, by 50%.

The research includes new data and analytics showing that the African Continental Free Trade Agreement (AfCFTA), signed in March 2018 by 44 African countries, offers substantial gains for all African countries. On 2 Feb Ethiopia was the 18th country to ratify the plan.

According to this article on nurmara.com “At around 15% regional trade remains the lowest globally, a major bottleneck to trade and investment. The estimate is that the AfCFTA could boost regional trade by 52% by 2022, and needs four more ratifications to come into force. The AU hopes to hit this target in February, but it might not mean much. The initiative needs to overcome a legacy of poor implementation.”

Download full report, research data
African Economic Outlook has been published annually since 2003 and is the African Development Bank’s flagship report. It provides analysis, data and also reference material on Africa’s economic development for researchers, investors, civil-society organizations and development partners.

A full set of updated growth projections will be released in May 2019, ahead of the Bank’s Annual Meetings in Malabo, Equatorial Guinea.
The full report is available online in English, French, and Portuguese at: http://www.afdb.org/aeo