Economic Growth

In 2008, growth was driven by the commodity-price boom, which peaked at mid-year and had clearly collapsed by the end of the year, accompanied by strong growth in private investment. Growing conditions in the agricultural sector were also generally favorable. Countries were beginning to have problems with controlling inflation, but, by and large, were continuing to reap the benefits of sound macroeconomic policies. As in previous years, oil exporters fared better than oil importers. All countries had to cope with higher prices of food and fertilizers. Thus, the gap in GDP growth rates between the two groups of countries widened to two percentage points. Growth would have been somewhat higher for the oil-importing countries were it not for the energy crisis in South Africa and the post-election civil unrest in Kenya.

In 2008, GDP growth was particularly strong in net oil-exporting countries, at 6.6 per cent, down only slightly from the exceptionally strong 6.8 per cent registered in 2007 largely due to the increase in oil prices and increases in production in a number of countries, together with increased public and private investment. However, the growth differential between these and net oil-importing countries widened from 1.4 percentage points in 2007 to a full two percentages points in 2008 with average GDP growth in the latter of 4.6 per cent in 2008, down considerably from the 5.4 per cent registered in 2007.

The contrast with the growth projected for 2009 is striking. Growth is expected to be markedly lower in both groups. However, the impact of the global crisis is expected to be felt more strongly in the oil-exporting countries (and mineral exporters) than in more diversified economies and in those exporting certain agricultural commodities such as beverages. Thus, the net oil importers can expect GDP growth of 3.3 per cent in 2009 compared to 2.4 per cent for the net oil exporters. A major factor accounting for the slowdown of growth in the oil exporters is the assumption that the African members of OPEC (Angola, Algeria, Libya and Nigeria) fully respect the agreement reached within that organisation to reduce production quotas in an attempt to sustain oil prices at levels somewhat above those assumed in this report. Our assumption is that the quota reductions will translate on average into a reduction of production of about 8 per cent for these four countries.

GDP growth is expected to pick up in 2010 when the average real GDP growth rate for the continent as a whole is expected to be 4.5 per cent, with net oil-exporting and net oil-importing countries growing at the same pace.

These forecasts are based on a number of plausible but somewhat optimistic assumptions, suggesting that they are subject to significant downside risk such as a more severe and prolonged international economic recession than expected, and greater than expected falls in aid, remittances, capital and trade flows. Apart from assuming a resumption of moderate growth in the global economy in 2010, they also assume that oil prices rebound to USD 50 per barrel in 2009 and USD 55 in 2010; that growing conditions in agriculture will be favourable in 2009 and 2010; that oil output of OPEC members will increase by about 3 per cent in 2010; that no new regional conflicts having significant macroeconomic impacts emerge; and that the worsening fiscal balances and current-account balances forecast for many of the net oil-importing countries (and a few net oil-exporting countries) will be fully financed. Thus, the continued implementation of debt-relief agreements for a number of the HIPC countries that began in 2006 will be particularly helpful.

North Africa

Economic growth was 5.8 per cent on average in 2008, up from 5.3 per cent in 2007. It is expected to slow significantly in 2009, to 3.3 per cent before increasing to 4.1 per cent in 2010. The 2008 growth rates reflected strong performances in nearly all the countries of the region. Exceptionally high growth was recorded in Egypt (7.2 per cent), Libya (6.5 per cent), and Morocco (5.7), while growth in Mauritania and Tunisia was slightly above 5 per cent. A sluggish hydrocarbon sector brought GDP growth in Algeria down to 3.3 per cent. All North African countries will grow more slowly in 2009, with reductions of about 3 percentage points for Algeria and Libya, due to cutbacks in oil production, and in Egypt because of lower tourism, Suez Canal revenues, and income from a range of other exports. Morocco and Tunisia have a pattern of production and exports that is less vulnerable to the reduction in demand resulting from the global crisis, but growth will slow there as well. With a global recovery in 2010, resumption of demand for exports from North African countries is expected to reverse many of the negative factors, leading to better figures for growth of between 3.7 per cent in Algeria and Libya to 5.4 per cent in Morocco.

West Africa

Real GDP growth in the countries of West Africa was 5.4 per cent in 2008, as it was in 2007, and is projected to slow by more than one percentage point to 4.2 per cent in 2009, before strengthening to 4.6 per cent in 2010. In the West African Economic and Monetary Union (WAEMU), consisting of Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo, economic performance improved in five of the eight countries, but slipped back a bit in Niger and Senegal. In Togo, however, GDP growth in 2008 was estimated to have been barely positive, at 0.8 per cent, continuing the pattern of declining growth in per capita income over the past several years, which was worsened by severe flooding in June 2008. Among the factors for the improved growth in most of these countries was the consolidation of political stability in Côte d’Ivoire – the largest economy within WAEMU – which had GDP growth of 2.3 per cent, about one-half percentage point higher than in 2007. Growth slipped back to 3.7 per cent in Senegal, primarily because of weakness in the output of cereals and groundnuts, as well as in industrial output, especially of phosphates and fertiliser. Cotton production increased, especially in Burkina Faso where it reached record levels in 2008. The major positive development in the WAEMU was the sustained growth in agricultural production in several of them. Mali benefited from high gold prices and reasonably strong growth in food production, and Niger from uranium prices. GDP growth in Mali was 3.6 per cent, up from 3.2 per cent in 2007; in Niger, it was 4.8 per cent, rather less than the 5.7 per cent registered in 2007.

Within the eight non-WAEMU members (Cape Verde, The Gambia, Ghana, Guinea, Liberia, Nigeria, Sierra Leone and São Tomé and Principe), Nigeria – by far the largest economy in West Africa – had GDP growth of 6.1 per cent in 2008, about the same as in 2007, despite reduced oil output of 8 per cent caused by disrupted oil production in the Niger Delta. Projections for 2009 indicate a slowdown of Nigeria’s growth rate to 4 per cent, mainly due to the binding constraint of the OPEC quota on oil production and the slowing down of growth in investment. Cape Verde’s growth performance remained strong in 2008 (6.1 per cent), compared to 6.9 per cent in 2007. In Liberia post-conflict spending on infrastructure and the recovery of agricultural production were responsible for exceptionally strong growth of about 7.3 per cent for the third year in a row, while in Ghana and Sierra Leone growth in 2008 was 6.4 per cent and 5.4 per cent, respectively, on the basis of good performance in cocoa production and processing, and strong increases in food production. Forecasts for 2009 are mixed, but, in addition to Nigeria which was mentioned above, most other countries are also expected to exhibit slower growth due mainly to slower growth in public and private investment associated with lower commodity prices and remittances. Unlike other countries in this group, Liberia and Sierra Leone are expected to continue to enjoy high growth levels as output recovers after years of conflict.

Central Africa

In 2008, average GDP growth in the seven countries of Central Africa was 5 per cent, up from 4 per cent in 2007. In 2009, GDP growth is expected to slow sharply, to 2.8 per cent and to increase to a moderate 3.6 per cent in 2010. The strong growth in 2008 was due mainly to a strong rebound of oil production in the Republic of Congo and continued strong growth in Equatorial Guinea (9.9 per cent) and Gabon (5.5 per cent), also net oil exporters. GDP failed to increase significantly in Chad in 2008 for the third consecutive year as a strong increase in agricultural output was offset by a sharp decline in oil production. Growth is projected to strengthen to 7.7 per cent in 2009 (compared to 7 per cent in 2008) in the Republic of Congo due mainly to increased oil production and high international oil prices which underpinned an expansion of public investment. In all other countries growth is expected to remain low or to fall, reflecting mainly the reduction in demand for the oil and minerals as a result of the global economic crisis. In the case of the Democratic Republic of the Congo, the effects of the global crisis have been compounded by renewed civil unrest, leading to a forecast of essentially zero GDP growth in 2009. The projections for Cameroon show some weakening in 2009 and 2010 with GDP growth of about 3 per cent per year, down from 4.1 per cent in 2008.

East Africa

GDP growth in East Africa averaged 7.3 per cent in 2008, down from a very strong 8.8 per cent in 2007, despite the turmoil in Kenya which caused growth to slow to 2.6 per cent, compared to 7 per cent in 2007. This strong growth is expected to slow to 5.5 per cent in 2009 and is projected to be about the same in 2010. In 2008, Ethiopia, Rwanda, Sudan, Tanzania and Uganda continued to be the fastest growing countries within East Africa, growing at 11.6 per cent, 8.5 per cent, 8.4 per cent, 6.8 per cent and 7 per cent, respectively. All five countries are also projected to maintain strong, but lower growth in 2009 and 2010 because demand for their major agricultural and horticultural exports is less sensitive to the effects of the global crisis than minerals and textile fibers; tourism has, however, been heavily impacted, and, these forecasts are subject to considerable uncertainties due to the unstable political situation in some countries. Burundi, Comoros and Seychelles, which have recently been exhibiting slow growth, are expected to continue stagnating, the latter two countries experiencing depressed tourism due to the global recession and, in the case of Comoros, to civil unrest as well. Djibouti, however, which grew by 5.9 per cent in 2008, is expected to experience an acceleration of GDP growth in 2009 and 2010, reaching about 6.6 per cent on average in this period. Kenya is also expected to exhibit strong growth in 2009 (5 per cent) due to recovery of domestic demand following the sharp slowdown in 2008. However, this rate of growth is about 1 percentage point lower than the average rate of growth in 2005-2007, reflecting the continued weakness of demand in the tourism sector.

Southern Africa

Economic growth in Southern Africa was 5.2 per cent, down sharply from the 7 per cent registered in 2007. It is expected to slow dramatically in 2009, to only 0.2 per cent before recovering to 4.6 per cent in 2010. This dramatic slowdown is mainly due to developments in South Africa and in Angola. In South Africa, growth slowed to 3.1 per cent, down from 5.1 per cent in 2007 due mainly to the energy crisis which affected large portions of the economy, a fall in private consumption and less buoyant private investment. The further slowdown to 1.1 per cent projected in 2009 is due mainly to the impact of the global economic crisis on demand for South Africa’s mineral exports compounded by a contraction in private consumption and investment. In Angola, growth remained extremely high (15.8 per cent) in 2008, but down from the 21 per cent registered in 2007. However, the economy is expected to contract by 7.2 per cent in 2009 on the assumption that the reduction in quotas by OPEC countries will translate into a reduction of oil production in Angola of about 10 per cent. In Madagascar and Malawi, growth accelerated to reach 7 per cent and 8.4 per cent, respectively due to strong growth in agriculture in both countries and to large investments in the mineral sector in the former. Growth slowed in all the other countries in the region, many of them affected by the slowdown in South Africa. In addition, mineral exporters (Mozambique, Namibia, Tanzania and Zambia) began to experience a slowing of investment in the second half of the year. Growth in Mauritius remained high, although it, too, lost some momentum compared to 2007. These trends are expected to intensify in 2009 with a further slowing of growth forecast for all countries. In the case of Madagascar, the situation is expected to be worse because of the impact of the political crisis, particularly on the tourism sector, with GDP growth expected to fall by more than 2 percentage points, to 4.8 per cent. On the assumption of a resumption of moderate growth in the world economy in 2010, these trends are expected to be reversed symmetrically with growth likely to accelerate (or resume, in the case of Angola) in nearly all countries.