Africa Development Bank Sees Growth Rising on Oil, Investment

Bloomberg
Tuesday, May 28, 2013

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Africa’s economic growth is expected to accelerate this year and next, led by oil and mining projects in West Africa and a resurgence in foreign direct investment, according to the African Development Bank.

Gross domestic product, excluding Libya and Somalia, will rise 4.5 percent this year from 4.2 percent in 2012, the bank said in its annual African Economic Outlook released in Marrakech, Morocco. Expansion will reach 5.2 percent in 2014.

Foreign direct investment may rise more than 10 percent to $56.6 billion this year, near the record set in 2008, while portfolio inflows are set to increase to a record $26.2 billion.

“The main engines of growth are expected to be expansion in agricultural production, robust growth in services and a rise in oil production and increased mining activity mainly in resource-rich nations,” according to the report.

“The main short-term challenge for the continent is to consolidate stable macroeconomic conditions in the face of a more volatile economic environment.”

The estimate leaves out Libya, because the revolution there has distorted economic growth, and Somalia, the bank said. Somalia’s new government is seeking to rebuild its economy after more than 20 years of anarchy and 15 failed attempts at creating a stable central administration.

Growth in the world’s poorest continent will be buoyed by rising domestic demand and increased output of commodities, offsetting a slowdown in China and another possible recession in Europe, according to the report.

Western Anchor

West Africa will help anchor growth, the bank said. The region encompasses Ivory Coast, the world’s largest cocoa producer, and Nigeria, the continent’s biggest oil producer. The outlook is weaker for southern and northern Africa, it said.

“In southern Africa, growth will remain blighted by the slow recovery in South Africa,” the bank, based in Tunis, said.

“In North Africa, the slow pace of transition to democracy is likely to continue to affect the economies of the region, despite the strong recovery in Libya’s oil production.”

While some commodity prices have fallen this year, the benefits are still flowing for exporters of natural resources, it said. The Standard & Poor’s GSCI gauge of 24 commodities has fallen 3.4 percent so far this year.

“Commodity prices remain well elevated to support growth of resource-rich countries,” the report said.

Inflation has been helped by easing commodity prices, the bank said. Africa’s inflation rate will drop to 7.4 percent in 2013 from 9.1 percent last year, although consumer-price growth remains above-target for many countries, limiting scope for central banks to lower borrowing costs, the bank said.

“Monetary policies in many African countries will have to continue to strike a balance between controlling inflation and supporting economic growth,” the bank said.

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