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SADC economies expected to grow by 3.6%, says AfDB

Southern African economies are expected to grow by 3.6 percent on average in 2018, with Tanzania’s economy projected to lead with 6.7 percent growth, followed by Mozambique and Botswana with growths of 5.3 percent and 5 percent, respectively.

Zimbabwe, South Africa, Angola, Namibia and the Democratic Republic of the Congo are at the bottom of the list of countries in the Southern African Development Community region whose economies are predicted to have sluggish growth of about 1 to 2.6 percent.

This is indicated in the African Development Bank’s African Economic Outlook for 2018, which expects average growth for the whole African continent to accelerate and average around 4.1 percent in 2018 and 2019, from an estimated 3.6 percent growth in 2017 and 2.2 percent in 2016.

The African Economic Outlook reports on the diverse socioeconomic realities of African economies through regular, rigorous, and comparative analysis and provides short-to-medium term forecasts on the evolution of key macroeconomic indicators for all 54 regional member countries in Africa, as well as analysis on the state of socioeconomic challenges and progress made in each country.

Tanzania’s growth is projected to increase to 6.9 percent in 2019, representing the best performances in the region and improve on its 2017 record, where it averaged around 6.8 percent. Construction, mining, transport, and communications were key growth drivers in 2017, according to the report.

Mozambique is expected to have recovered its GDP growth to an estimated 4.7 percent in 2017 and a projected 5.3 percent in 2018 due to increased coal exports and agricultural production.

However, the country has yet to recover from the economic downturn that started in 2015, combined with the declining prices for traditional export commodities, persistent drought effects from El Niño, internal military confrontations, and large decreases in foreign direct investment due to the 2016 governance crisis, which reduced external financing and donor support.

Botswana’s real GDP growth is projected to rise to nearly 5 percent in 2018 due to good performance in non-mining and the continued recovery in mining which is expected to support growth.

Botswana’s economy contracted to 1.7 percent in 2015 due to weak demand for diamond exports, severe drought, and persistent electricity and water supply shortages, but real GDP growth increased from 4.3 percent in 2016 to an estimated 4.5 percent in 2017 as non-mining activities, such as water and electricity; trade, hotels, and restaurants; transport and communication; and construction picked up.

At the bottom of the list is Zimbabwe economy whose real GDP growth is projected to be 1 percent in 2018 and 1.2 percent in 2019 due to uncertainty in political change. Other challenges include high weak domestic demand, high public debt, weak investor confidence a liquidity crisis, which is a manifestation of structural deficiencies and distortions in the economy, according to the African bank’s report.

South Africa, which has been experiencing economic headwinds since 2016, when its economy’s GDP contracted to 0.3 percent, is projected to reach 1.1 percent in 2018 and 1.6 percent in 2019.

This has been as a result of the sharp decline in international commodity prices for the country’s four key exports coal, platinum, iron ore and gold since 2012.

All in all, East Africa remains the fastest-growing sub-region in Africa with strong growth widespread in countries like Djibouti, Ethiopia, Kenya, Rwanda, Tanzania and Uganda, growing by 5 percent or more.

East Africa is followed by North Africa which recorded average growth rate of 5 percent in 2017, with projected growth to accelerate to 5.1 percent in 2018.

Southern Africa, whose average growth has doubled in 2017, comes in third place, while West Africa follows suit with increased oil production and output growth in agriculture, which all expected to accelerate growth to 3.6 percent in 2018 and 3.8 percent in 2019.

Central Africa continues to be the least performing region even with the recovery in oil prices, where output contracted sharply in the Republic of Congo (-4.0 percent) and Equatorial Guinea (-7.3 percent), weighing down the region’s overall growth to 0.9 percent in 2017.

The sub-region’s deep-seated dependence on oil, together with the fixed exchange rate and lack of independent monetary policy levers to adjust to changing economic conditions (because of all five countries’ membership in the Central African Economic and Monetary Community, have slowed growth.

“Overall, the recovery in growth has been faster than envisaged, especially among non-resource–intensive economies, underscoring Africa’s resilience. The recovery in growth could mark a turning point in net commodity-exporting countries, among which the protracted decline in export prices shrunk export revenues and exacerbated macroeconomic imbalances,” reads the African Economic Outlook report.

The report further states that many African economies are more resilient and better placed to cope with harsh external conditions than before, but the end of the commodity price super-cycle has cut earnings from primary exports in many countries, undermining planned investments. Weaker external conditions have exposed fiscal vulnerabilities in natural resource–dependent economies as well as several others.

The African Development Bank recommends African countries to focus on how best to use their scarce infrastructure budgets to achieve the highest economic and social returns as infrastructure projects are among the most profitable investments any society can make.

According to the report, Africa’s infrastructure needs run between $130– 170 billion a year and in order for the continent to end poverty and to generate employment for the 12 million young people who join its labour force every year, it must industrialize to.

“Africa has to attract private capital to accelerate the building of critical infrastructure needed to unleash its potential. Africa now collects about $500 billion in tax revenue every year, $50 billion in foreign aid, $60 billion in remittances, and $60 billion in FDI inflows,” the report points out.

Akinwumi Adesina, president African Development Bank Group, says that the first priority for African governments is to encourage a shift toward labour-absorbing growth paths, while a second priority is to invest in human capital, particularly in the entrepreneurial skills of youth, to facilitate the transition to higher-productivity modern sectors.

He added that continued prudent macroeconomic efforts are needed to create the incentives and business environment for the private sector to play its role with a policy that should aim to ensure continued prudent macroeconomic efforts.

“Macroeconomic policy should aim at ensuring external competitiveness to avoid real exchange rate overvaluations and get the full benefits of trade, improve fiscal revenue, and rationalize public expenditure.

To achieve these goals, the macroeconomic framework must blend real exchange rate flexibility, domestic revenue mobilization, and judicious demand management,” said Adesina.

Expected GDP growth for Southern African economies 2018

Angola 2.4%
Botswana 5%
Lesotho 4.3%
Madagascar 4.2%
Malawi 4.5%
DRC 3.3%
Mauritius 4.2%
Mozambique 5.3%
Namibia 2.6%
Seychelles 3.4%
South Africa 1.1%
Swaziland 2.5%
Tanzania 6.7%
Zambia 4.0%
Zimbabwe 1.0%

Source: The SouthernTimes


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