afrol News, 18 January - The World Bank foresees economic growth continuing to be strong in Africa this and next year; probably even stronger. Investments in infrastructure are paying off and African raw materials are more demanded than ever on global markets.
According to Global Economic Prospects, the World Bank's biannual report on global economic trends, sub-Saharan Africa is enjoying good short-term economic prospects. The report notes that Africa's gross domestic product (GDP) jumped 4.7 percent in 2010, a trend that is expected to hold steady in 2011 and 2012, at 5.3 percent and 5.7 percent, respectively.
Several factors contributed to the rebound of the African economy, according to the report. First, there had been a "strong demand for raw materials," in particular, metals, minerals, and oil, owing to the economic recovery seen across the globe.
This had been the case, for example, in Congo Brazzaville, which earns the lion's share of its revenues from oil production. The estimated growth rate of 10.3 percent in Congo Brazzaville was the highest in Africa in 2010.
Likewise Ghana, a new member of the club of oil-producing countries, "is poised" to upstage Congo Brazzaville in 2011, according to the report, with a predicted growth rate of 13.4 percent. Ghana's economy grew by 6.6 percent in 2010, and forecasts indicate a growth rate of 10 percent in 2012.
South Africa, the continent's largest economy, however posted a relatively modest growth rate of 2.7 percent in 2010, while Nigeria - with a 7.6 percent increase in its GDP - had reaffirmed the upward trend "and should stay the course in 2011 and 2012," the World Bank analysts hold.
Foreign direct investments in sub-Saharan Africa grew by 17 percent in 2010 after a 12.3 percent decline in 2009. "This trend confirms Africa's position as a preferred destination for foreign capital," according to the report, although only three countries - South Africa, Angola and Nigeria - account for 40 percent of these capital flows.
Africa had also benefited from an increase in agricultural productivity. In Ethiopia, for example, the estimated growth rate of 9 percent in 2010 was essentially spurred by the agricultural sector. This sector benefited from investments in the road network and in the power sector, which helped the emergence of small farmers.
In another example, higher corn yields, combined with increased uranium exports, enabled Malawi to register a growth rate of 6.8 percent in 2010 despite a slowdown in tobacco production - the country's main export commodity.
Similarly, Kenya's recovery in 2010 - with a 5 percent increase in GDP - was attributable to tea exports, which grew by 50 percent over the previous year owing to favourable climatic conditions. Horticulture, another key economic sector in Kenya, was hard hit by the adverse shocks in Europe, particularly the volcanic eruption that led to the cancellation of several flights. To counter this loss in revenue, Kenya had to turn to the industrial sector.
According to the World Bank report, the foreseen high food prices in the coming year and the climate are posing the main real risks for Africa's otherwise positive growth perspectives.
The good news of a return to economic growth in Africa was "clouded by uncertainty over high food prices, which pose a real risk to the well-being of populations across the continent." For low-income households that spend a substantial share of income on food, an increase of 10 to 20 percent in the price of food items could wipe out the gains brought about by the strong growth.
The risk was "further exacerbated by climate-related hazards," such as the floods that recently ravaged several West African countries, including Benin. Such hazards continued to cause worry in the agricultural sector. Africa needed to get better prepared for climatic hazards, the World Bank advised.
"In addition, there are other equally important risks, such as those linked to a possible slowdown in the global economy, as well as the imponderables related to the political environment, given that elections are scheduled to be held in some 20 countries this year. Caution must therefore be exercised," the report cautions.
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