Africa GDP growth to slow to 3.7 pct in 2011: AfDB

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Africa’s economic growth is likely to slow to 3.7 percent in 2011 from 4.9 percent in 2010, disrupted by political unrest and regime changes in North Africa, said the African Development Bank.

“Serious headwinds weigh on the momentum for expansion in 2011, notably the political events in North Africa and the high fuel and food prices,” the bank said on Monday in its annual economic outlook.
“The first quarter of 2011 has been among the most turbulent in Africa’s history.”

Egypt and Tunisia ousted their presidents this year, political protests took place in several other North African countries and western governments have become involved in a conflict in Libya, Reuters reports.

North Africa is the region likely to suffer the biggest knock, the AfDB said, forecasting growth there to slow sharply to 0.7 percent in 2011 from 4.6 percent in 2010, before picking up to above 5 percent in 2012.

Growth across Africa is expected to accelerate to 5.8 percent in 2012, but there are risks from the impact of the earthquake and nuclear crisis in Japan, civil war in Libya and the effects of post-election conflict in Ivory Coast.

East Africa’s economy is expected to show growth of 6.7 percent this year, from 6.2 percent in 2010, but West African growth is likely to ease to 6 percent from 6.7 percent, due to the Ivory Coast conflict.



Foreign direct investment, one of the few ways to invest in African countries without liquid capital markets, is estimated to have fallen to $50-52 billion in 2010 from $59 billion in 2009 and a peak of $72 billion in 2008.

Oil-exporting countries account for 75 percent of FDI flows, while China is Africa’s largest trading partner, the bank said.

High oil prices are boosting the growth of commodity exporters such as Algeria, Angola, Nigeria and Sudan.

But rising energy and food prices are pushing up inflation, which the AfDB sees averaging 8.4 percent in 2011 and 7.4 percent in 2012, from 7.7 percent in 2010.

Africa’s average fiscal deficit is expected to increase in 2011 towards 4 percent of GDP but decline again to slightly above 3 percent in 2012.

The report warned governments against using new-found revenues from oil or other resources in rapid spending which could fuel inflation, recommending the use of sovereign wealth funds to conserve wealth for future generations.

Such funds “could potentially play a bigger role for Africa’s development but this also requires that their fiscal transparency and corporate governance structure is further improved,” the bank said.

The AfDB holds its annual meeting in Lisbon on June 9/10, its first in Europe for 10 years.

North Africa will be the main focus for the meeting.

The AfDB last week approved a $500 million loan to support Tunisia’s interim government and also said it would lend the country $210 million by the end of June to finance infrastructure projects.

G8 leaders have also called for an extension of the European Bank for Reconstruction and Development’s mandate to cover the transition of “Arab spring” economies.