Ethiopia, which was momentarily upstaged by cocoa-rich Cote D’Ivoire in 2016, has been tipped to emerge as the fastest growing economy in Africa in 2018. The continent’s economy as a whole is also expected to record growth as the economies in the region continue their recovery from the slump in commodity prices.
The International Monetary Fund (IMF) released some data in the 2018 World Economic Outlook report which predicts Ethiopia will grow the quickest at 8.5 percent. The country’s rapid economic growth is, however, cooling off after it reached a personal record high of 10.9 percent in 2017. The report which was published on Tuesday shows Cote D’Ivoire, Senegal and Rwanda are close behind in the range of 7 percent; with the whole region set to expand by 3.4 percent from 2.8 percent recorded last year.
The growth of the region is strongly linked to the recovery of commodity prices on the international market. During the question-and-answer session at the launch of the report, the Deputy Chief of the World Economic Studies Division, Malhar Nabar, said the reason behind the growth was the improvement in commodity prices, but also expressed concerns regarding the sustainability of the growth with the bleak prospect of prices of commodities, especially oil, in the future.
“There are some big challenges that the region faces, primarily for the commodity exporters, the oil exporters. There is a need to diversify away from the dependence on resource extraction to other sectors, and, more broadly, a need to put in place policies that encourage more broad‑based growth and address the constraints that exist in product markets and in labour markets across the regions,” he said.
Mr. Nabar also discarded concerns about the possibility of the US-China trade war affecting the growth of African countries. He noted that the concerns are quite premature and the effect will be limited to possible reactions of investors in the financial markets.
“In terms of the spillovers from the trade war, it is still too early to assess this. The measures that have been talked about—at the moment, our sense is that the direct impact on the directly affected countries is likely to be quite limited; but, of course, there is an issue of how financial markets react to this, the sentiment in financial markets.
“And to the extent that frontier economies, as well as other economies in the sub‑Saharan Africa region, are affected by the changes in financial markets, that could be a channel through which these economies are affected by the developments that we are seeing on the trade front,” he added.
Ethiopia, whose Gross Domestic Product (GDP) almost doubles Ghana’s, has drawn investors including General Electric Co., Johannesburg-based Standard Bank Group and hundreds of Chinese companies. The country’s growth is driven majorly by investments in infrastructure, as well as sustained progress in the agricultural and service sectors.
Nigeria, Africa’s top crude producer, is expected to grow at 2.1 percent while South Africa, which is still recovering from political tensions, will expand by 1.5 percent. However, with the elections in Nigeria next year, IMF predicts a deceleration to 1.9 percent in 2019. The two biggest economies in Africa account for almost half of the continents’ GDP.