African Economic Outlook indicates steady growth through 2021
by Babalwa BunganeAfrica’s economic growth remained stable in 2019 at 3.4% and is on course to pick up to 3.9% in 2020, and 4.1% in 2021 as revealed in the African Development Bank’s 2020 African Economic Outlook (AEO).
The slower than expected growth is partly due to the moderate expansion of the continent’s “big five” — Algeria, Egypt, Morocco, Nigeria, and South Africa – whose joint growth was an average rate of 3.1%, compared with the average of 4.0% for the rest of the continent.
In 2019, for the first time in a decade, investment expenditure, rather than consumption, accounted for over 50% of GDP growth.
This shift can help sustain and potentially accelerate future growth in Africa, increase the continent’s current and future productive base, while improving productivity of the workforce.
Overall, the forecast described the continent’s growth fundamentals as improved, driven by a gradual shift toward investments and net exports, and away from private consumption.
East Africa maintained its lead as the continent’s fastest-growing region, with average growth estimated at 5.0% in 2019; North Africa was the second-fastest, at 4.1%, while West Africa’s growth rose to 3.7% in 2019, up from 3.4% the year before.
Central Africa grew at 3.2% in 2019, up from 2.7% in 2018, while Southern Africa’s growth slowed considerably over the same period, from 1.2% to 0.7%, dragged down by the devastating cyclones Idai and Kenneth.
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Urgent call to address Africa’s education, skills mismatch
The 2020 AEO, themed Developing Africa’s workforce for the future, calls for swift action to address human capital development in African countries, where the quantity and quality of human capital is much lower than in other regions of the world.
The report also noted the urgent need for capacity building and offers several policy recommendations, which include that states invest more in education and infrastructure to reap the highest returns in long-term GDP growth. Developing a demand-driven productive workforce to meet industry needs, is another essential requirement.
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“Africa needs to build skills in information and communication technology and in science, technology, engineering, and mathematics. The Fourth Industrial Revolution will place increasing demands on educational systems that are producing graduates versed in these skills,” the report noted.
To keep the current level of unemployment constant, Africa needs to create 12 million jobs every year, according to the report. With rapid technological change expected to disrupt labour markets further, it is urgent that countries address fundamental bottlenecks to creating human capital, the report said.
“Youth unemployment must be given top priority. With 12 million graduates entering the labour market each year and only 3 million of them getting jobs, the mountain of youth unemployment is rising annually,” said Akinwumi Adesina, African Development Bank President, who unveiled the report.
“Let’s look at the real lives beyond the statistics. Let’s hear their voices, let’s feel their aspirations,” added Adesina.
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Although many countries experienced strong growth indicators, relatively few posted significant declines in extreme poverty and inequality, which remain higher than in other regions of the world.
Essentially, inclusive growth — registering faster average consumption for the poor and lower inequality between different population segments — occurred in only 18 of 48 African countries with data.
Hanan Morsy, director of the macroeconomic policy, forecasting and research department at the Bank, also commented: “As we enter a new decade, the African Development Bank looks to our people. Africa is blessed with resources but its future lies in its people…education is the great equaliser.
“Only by developing our workforce will we make a dent in poverty, close the income gap between rich and poor, and adopt new technologies to create jobs in knowledge-intensive sectors.”
The African Economic Outlook provides compelling up-to-date evidence and analytics to inform and support African decision-makers. The publication has built a strong profile as a tool for economic intelligence, policy dialogue and operational effectiveness.