Growth Remains Higher in East Africa Compared to Other Regions in the Continent

Economic growth varies across countries and regions, reflecting factors such as differences in income levels, dependence on commodity exports, political and social stability, and macroeconomic and structural policies. In 2015, growth continued to be highest in East Africa, followed by West Africa and Central Africa, and remained lowest in Southern Africa and North Africa. Assuming a gradual improvement in international and domestic conditions, growth is projected to accelerate in all regions in 2016/17.

In 2015, East Africa was again the continent’s fastest-growing region and is expected to continue its high growth path in 2016/17. The region benefits from large FDI inflows, although there is some uncertainty about the actual development of these flows in 2015. The region’s strong growth performance in 2015 was widespread with many countries achieving growth of more than 5 percent (Djibouti, Ethiopia, Kenya, Rwanda, Tanzania and Uganda) and expected to continue on a high growth path in 2016/17.

Sudan also performed better following the shock of the secession in 2011. Growth in these countries was often driven by services and construction including public investment programmes, but also partly by industry and – where weather conditions remained favorable (Sudan and Tanzania) – by agriculture. Conversely, in South Sudan the fall in oil prices and oil production and the political conflict had a strong negative impact on real GDP, which contracted in 2015. The future outlook depends in particular on the timely implementation of the latest Peace Agreement.

In Eritrea, the economy stagnated due to low export demand and difficult business and investment conditions, and in Comoros the energy crisis continued to weigh on growth. In West Africa, growth slowed in 2015 due to the sharp fall in commodity prices and the Ebola crisis. In Nigeria, Africa’s largest economy, oil production remained low and growth of the non-oil sector weakened as the government cut spending due to lower oil revenues.

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Private-sector activity was also adversely affected by tighter monetary policy and foreign exchange restrictions, which were implemented to counter depreciation of the currency. Growth is expected to recover gradually with the help of a more expansionary government budget. The Ebola crisis has a significant impact on the economies of Guinea, Liberia and in particular Sierra Leone, with the fall in commodity prices further adding to the shock. However, some other countries in the region achieved relatively high growth in 2015 (Benin, Côte d’Ivoire, Mali, Senegal and Togo) and their outlook for 2016/17 remains favorable.

In Central Africa, growth also weakened in 2015. Growth in the Republic of the Congo (Congo) declined as the government responded to falling oil revenues by cutting infrastructure investment. In Equatorial Guinea, GDP fell as oil production declined, and this trend is likely to continue in 2016/17. In the Central African Republic, GDP recovered despite the political conflict and security risks, and with improved security and a normalization of international co-operation the economy should continue to pick up. Cameroon continued its trend of solid and broad-based growth driven by agriculture and forestry, construction, industry and oil production, despite security problems in parts of its northern border region.

In Gabon, the government continued its investment programme and boosted growth despite lower oil revenues. In the Democratic Republic of the Congo, growth moderated in 2015 but remained solid, driven by agriculture, services and industries, with production increasing in the majority of extractive industries. In Southern Africa, growth slowed down in 2015 and is expected to recover only in 2017. Weak international conditions including lower commodity prices, the drought and other factors, such as power shortages, dampened growth in the region in 2015. South Africa continued its low growth trajectory and is expected to weaken further in 2016 before recovering in 2017.

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Many factors, notably low commodity prices, weak export demand, and power shortages, strikes and the drought in agriculture, are depressing consumer and business confidence and production. As South Africa is an important export destination for neighbouring countries its weakness affects the whole region. In other countries in the region that depend even more on commodity exports, notably Angola (oil) and Zambia (copper) as well as Botswana (diamonds), growth also declined. In Mozambique, growth moderated in 2015 but remained solid, and was boosted by higher production in agriculture and the power and extractive industries sectors. Despite a significant reduction in 2015, FDI also remained a major driver of Mozambique’s growth. In North Africa, the macroeconomic situation remains uneven.

In Libya, disruption in oil production and ongoing political conflicts and uncertainty led to another fall in real GDP. Ending the fighting between rival militias and establishing a national government is key for an economic recovery. Tunisia achieved only modest growth in 2015 boosted by good harvests, while production in other sectors remained weak. Mining and industry sectors were adversely affected by weak exports and tourism, which had recovered gradually, declined once again after terrorist attacks. In Algeria, growth remained steady thanks to a rebound in oil production.

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Morocco achieved the highest broad-based growth in the region supported on the demand side by private consumption and investment and on the production side by the construction sector and agriculture, which benefited from good weather conditions and past investment in irrigation. Tourism was also adversely affected by security problems in the region but to a much lower extent than in Tunisia. In Egypt, growth strengthened as the political scene stabilized and business sentiment improved. Higher wages and social spending supported consumption and investment also increased. On the production side, the service sector boosted growth although tourism was again adversely affected by security concerns. Current plans for economic reforms and mega projects will, if fully implemented, further strengthen the economy.