Africa Economic Outlook Still Positive Despite Rising Conflict

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Written by Kevin Mwanza

The Africa Development Bank (AfDB) has maintained a positive outlook on Africa’s Economic growth projecting a 4.3 percent rise in this years and an acceleration to between 5 and 6 percent in 2015, on the back of expected gradual recovery of the world economy from a crippling financial crisis in the US and Europe and social stability in African countries currently affected by conflicts.

The bank forecasts that growth in Sub-Saharan Africa, excluding South Africa where the economy has suffered several external shocks and North Africa where the countries are still hurting from the aftermath of the Arab Spring, could come in much higher at an estimated 6.8 percent in 2014.

“Growth in Sub-Saharan Africa was 5% in 2013 and is  projected to be 5.8% in 2014. Excluding South Africa, the figures are 6.1% and 6.8%, respectively,” the Africa Economic Outlook Report said. “East and West Africa recorded the fastest growth in 2013, above 6%.”

The report said Inflationary pressures had eased in many African countries helped by stable energy prices and reduction in food prices. It however cautioned against fiscal policy laxity and asked policymakers to keep an hawk eye on interest rates to avoid weakening currencies that could spark inflationary pressures again.

“Other risks are related to weather conditions, which may be worse than assumed and reduce harvests and cause food prices to rise,” it added.

Elements of fragility

Conflict was also mentioned as one of the biggest threat to growth in Africa. With fighting breaking out in Central African Republic, Mali and South Sudan since the end of last year, causing unnecessary deaths, displacing thousands of people and creating a food crisis in these countries.

In the West, Nigeria is struggling with increases insurgency  by the Islamist Militants Boko Haram in the northeast part of the country, where the militants recently abducted over 300 school girls and sparked global outrage, while in the East, Kenya has also suffered several attacks from the Al Quaeda linked Al Shabaab militants following its army incursion into Somalia in 2011.

“Each one of our countries has got elements of fragility. At a time when Africa is taking off, we need to work together to contain some of those crises, but on balance I’m optimistic,” Donald Kaberuka, AfDB’s president, told Reuters after unveiling the report in Kigali, Rwanda.

On the investment front, foreign direct investment into African economies is expected to hit a record $80 billion this year, lifted by Chinese and emerging markets investors strong interest in African assets.

The report said that despite increase presence of Chinese investment on the continent, the U.S., U.K. and France still held the biggest stock totaling over $178.2 billion in Africa investments as of the latest available data from 2012.

The so-called Brics countries -Brazil, Russia India, China and South Africa- collectively held investments worth $67.7 billion of which $27.7 billion were Chinese.

The Africa Economic Outlook report said “External financial flows have quadrupled since 2000 and are projected to reach over USD 200 billion in 2014.”