Report: African economy to grow by 4.8 per cent in 2010 (Roundup)

May 18, 2010, 12:13 GMT

Addis Ababa - Africa's economic growth is expected to rebound to 4.8 per cent in 2010 after dipping by over 2 per cent in 2009, according to a report released in Ethiopia's capital Tuesday.

The annual report by the United Nations Economic Commission for Africa (UNECA) and the African Union Commission, launched in Addis Ababa, said that growth in Africa fell to 2.4 per cent in 2009, down from 4.9 per cent the previous year.

Growth in 2009 was highest in West Africa at 5.5 per cent, partly due to a boost in oil output in the Nigeria's Niger Delta following decreased attacks by militants.

East Africa's economies grew by 4.3 percent, while North Africa posted a Gross Domestic Product (GDP) growth rate of 3.6 per cent. Central African economies grew by an average 1.8 percent and in Southern Africa, the economies shrunk by 1.1 per cent.

However, most economies are expected to recover as the global crisis slowly recedes and demand for African commodities swells.

'The global downturn has aggravated the situation, but the lessons from those shocks should help countries pursue policies to enter paths of high-level growth rates,' Adam Elhiraika, head of the Macroeconomic Analysis Section at UNECA, told journalists.

Commodity prices, an important determinant of growth in many African economies, are expected to stabilize in 2010 and rise moderately in 2011, the report said.

The rebound is mainly due to higher petroleum prices, partly due to increased demand from China and the upward revision of expected world demand.

West African economies are expected to perform strongest in 2010, growing by 6.4 per cent, followed by East Africa at 5.4 per cent.

Southern Africa's economies are expected to grow by 3.8 per cent.

However, the report cautioned that challenges lay ahead.

'Africa's long-term growth prospects and ability to sustain high rates of employment generation and broader social development depend on success in economic diversification,' the report said.

It also argues that African countries must prioritize the creation of decent jobs as a central pillar of macroeconomic policy in order to eradicate poverty.

The global economic crisis also offers African countries an opportunity to lay the foundation for sustainable, employment intensive, high economic growth rates, the report said.

'The recent economic crisis provides countries with the opportunity not only to adopt and implement policies that mitigate the negative impact but also to lay the foundation for structural transformation and employ the rapidly growing labour force,' Elhiraika said.

Investment in infrastructure and human capital, efforts in domestic resource mobilization, market reforms, incentives to support private-sector employment and efforts to increase productivity and income in the informal sector are needed to achieve these aims.

Climate change will also strongly influence Africa's GDP growth, the report predicted.

If climate change goes unchecked, agricultural output is expected to decrease by 50 per cent in Africa, resulting in severe undernourishment. The health burden and conflicts will increase as populations fight over dwindling resources.

The costs of adaptation and mitigation are, however, extremely high and beyond the means of African countries. It is estimated that the cost of adaptation alone could be between 5 and 10 per cent of the continental GDP.