Report: Economic Diversification to Shield African Economies

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Emma Okonji with agency report

As concerns of a possible global recession gathers strength, most African economies may be unaffected owing to the strength of economic diversity in some regions. This was stated by the Institute of Chartered Accountants in England and Wales (ICAEW), in its latest report, titled “Economic Update: Africa Q4 2019.”

The professional accountancy body provides GDP growth forecasts for various regions including East Africa. The region in Africa was estimated to have experienced the most rapid real GDP growth of 6.3 per cent in 2019 and was forecast to continue doing so over the next two years.

According to the report, behind East Africa, is the franc zone, the second-fastest growing region in Africa, where GDP growth is forecast at 4.9 per cent for 2020.

The ICAEW report, produced in partnership with forecaster Oxford Economics, also indicated that Africa would become home to half of the 10 fastest-growing economies on the planet over the next five years.

The report found that, despite the gloomy backdrop created by slow growth in the United States, China and Europe, Africa remains a relative bright spot with many positive economic stories. Although the continent’s two largest economies, Nigeria and South Africa, continue to struggle, the report stated that Africa would become home to half of the 10 fastest-growing economies on the planet over the next five years.

Speaking during the launch of the latest report, ICAEW Regional Director for Middle East, Asia and Africa, Michael Armstrong, noted that the strength of the diversified economies in the east of the continent plays a major role in cushioning them from the shocks a global slowdown in economic growth.

“Africa’s commendable growth performance in the context of dismal returns in the developed world continues to attract investor interest. This interest keeps the African economies on a growth trajectory with new money entering the respective economies which can only be a good thing when looked at in comparison to the global outlook which shows a weakening of global GDP growth,” Armstrong said.

“As has been the case for a while now, East Africa’s economic growth is expected to remain robust, easing slightly from 6.3 per cent in 2019 to 6.1 per cent in 2020. Most of the region’s economies continue to benefit from lower international commodity prices while the consumption-driven growth structure prevalent in the region insulates these economies from the global trade slowdown,” he added.

Economic growth in the franc zone was also expected to remain strong, increasing from 4.7 per cent in 2019 to 4.9 per cent in 2020.

“Côte d’Ivoire’s effective exploitation of its mineral and agricultural resources has been accompanied by an ambitious government development plan, while Senegal’s relatively diversified economy has been supported by the Plan Senegal Emergent development strategy,” Armstrong further said.

The report stated that North Africa’s economic performance remained volatile due to instability in Libya, with regional growth picking up from 2.8 per cent in 2019 to 4.5 per cent in 2020.

In Egypt, the region’s economic anchor and favourable policy adjustments are translating into improved macroeconomic fundamentals and a positive growth outlook.