Business, Finance & Economics

Africa's economies achieve 5 percent growth


Satellite view of West Africa.



Africa has achieved impressive economic growth this year.

Sub-Saharan Africa is expected to show 5 percent growth in 2011, according to the International Monetary Fund's latest regional report. And the outlook for 2012 is even brighter, with forecasts that Africa will average 6 percent growth.

The positive gains are even more impressive when compared to the decline and turmoil in other parts of the world, especially Europe.

But the world's financial volatility could hurt Africa by causing lower exports, less foreign investment and decreased aid, warned the IMF's Africa director, Antoinette Sayeh, according to the BBC. Inflation, driven by high food and fuel prices, could also become a problem, she said.

African governments should "tread a fine line between addressing the challenges posed by strong growth and preparing to ward off the potentially adverse effects of another global downturn," said Sayeh.

Africa's middle-income countries, most notably South Africa, have not had the same success, achieving growth of just 3.5 percent in 2011.

Africa has been hit by high unemployment and household debt, fragile consumer confidence and weak demand from Europe.

The rosy projection for continued economic growth in Africa assumes that the global economy will regain some of its positive momentum in the coming months. If not, then Africa's economies could be hurt and their growth could falter.

Africa's recent economic growth has been impressive in quality and breadth, according the IMF's background studies published in the outlook. Rising consumption of the poorest households, especially in countries where growth has been sustained at high levels, and the opportunities for intensifying trade with new growth markets indicate Africa's overall economic base is strengthening.

Supportive monetary and fiscal policies helped Africa weather the 2009 global crisis in 2009 and set it on a recovery path for 2011 and 2012. Economic activity has also been driven by higher commodity prices and increased export demand, although to a varying extent across country groupings, according to the IMF.

In many of sub-Saharan Africa’s low-income countries, growth is being supported by buoyant domestic demand along with export diversification into higher–value production and to fast-growing emerging markets.

However, higher food and fuel prices are bringing considerable difficulties, especially to the urban poor, and drought in the Horn of Africa is imposing untold hardships on households in that region.

For Africa's oil-producers and other resource-exporting countries, strong commodity prices are helping to support growth, the terms of trade, and foreign exchange reserves. For example, oil exporters are expected to grow by 6 percent in 2011 and 7 percent in 2012, above the regional average.

That's good news, but that growth must still reach Africa's poor. Are Nigeria and Angola's oil earnings helping those countries' poorest?