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Continuous improvement of economic growth fundamentals African economy is expected to recover gradually

category:Finance
 Continuous improvement of economic growth fundamentals African economy is expected to recover gradually


According to the latest world economic outlook report issued by the International Monetary Fund, sub Saharan Africas economic growth rate in 2019 is expected to be 3.3% and 3.5% this year and next, 0.1 and 0.2 percentage points lower than last Octobers forecast.

In terms of the subregion, East Africa is still the fastest growing region in Africa. According to the United Nations report, East African countries, stimulated by strong domestic demand and public infrastructure investment, have a stronger economic growth momentum than other subregions, and are expected to stabilize at 6% in 2020. In particular, the report mentions that the latest peace agreements signed by Djibouti, Eritrea, Ethiopia and Somalia in East Africa are expected to release new investment and trade opportunities in the horn of Africa.

At the same time, the economy of West Africa will continue to grow steadily, but many countries in the region urgently need to promote structural reform to further release the growth potential; Central African countries benefit from the rise of oil production, which may maintain a moderate economic growth trend, but the unstable security situation cannot be underestimated; the economy of Southern African countries is expected to continue to grow slowly, which is subject to Energy shortages, frequent extreme weather and other factors may cause some economies to stagnate or decline.

As a whole, half of the worlds fastest-growing economies are still on the African continent. In the past five years, the economic growth of these countries has stabilized at about 5%, which is higher than the average global growth level. In the future, African economy will continue to maintain its growth momentum and face many challenges.

Multiple factors restrict growth

The slowdown in Africas economic growth is constrained by multiple factors. Slowing global economic growth and weak demand from key trading partners are seen as important challenges to regional economic growth. The United Nations report points out that the deterioration of the global economic environment may have an impact on Africas growth prospects through a variety of channels, including falling demand for commodities, falling prices of raw materials, reduced capital inflows and foreign direct investment, and reduced income from foreign exchange and tourism.

The latest report of Moodys, an international rating agency, found that the increasing external risks, weak growth and deterioration of public finance are the reasons for the continued poor sovereign credit rating of African countries. At present, many African countries generally face greater debt pressure. The increase of debt burden not only reduces the investment willingness of international investors, but also may lead to a substantial devaluation of African countries currencies, which in turn affects their solvency. Experts believe that with the continuous advancement of structural reform in African countries, the debt structure will become more reasonable, and the confidence of international investors is expected to gradually recover in the future.

Climate change and the increase in violent conflicts are also important constraints on Africas economic growth. Since last year, violent conflicts caused by religious and tribal conflicts have increased significantly in many regions of Africa, and the increasingly volatile situation has seriously affected local economic and social development. In addition, extreme weather in Africa is increasingly frequent, which has a huge impact on most African countries with agriculture as an important economic pillar. For example, the 2019 tropical cyclone caused sustained droughts in the Sahel region and southern Africa, increasing food insecurity in many countries.

The future is still promising

Some analysts pointed out that although Africas economic development is facing a complex and changeable international and domestic environment, the development potential of the region is huge and the prospect is promising. With the trend of global production capacity transfer, most African countries will attract enterprises from many countries to invest and set up factories because of their abundant cheap labor, low land cost and preferential export tariff. This trend of capacity transfer will continue in 2020, which is an important driving force for Africas economic development in the future.

Many experts believe that the construction of the free trade area on the African continent will inject vitality into the economic development of the continent. This large market of free trade zone, with a population of 1.2 billion and a total GDP of 2.5 trillion US dollars, is regarded as a major good for promoting regional economic integration.

In order to further improve the level of trade within the African continent and create conditions for the economic development of Africa, in June 2015, the African Union Member States launched the free trade area negotiations on the African continent. After four years of negotiations, last July the Au special summit officially announced the establishment of the free trade area on the African continent. In 2020, the tariff threshold between African countries will be further reduced, and goods, services, funds and people will flow more freely in the region, which will greatly promote African economic growth. According to the latest research of American Brookings Institution, if the free trade area agreement of the African continent can be fully implemented, the total GDP of the African continent will jump from the current US $2.1 trillion to US $3 trillion in 2030, and the internal export of Africa will increase by 33%.

The United Nations report points out that the economic diversification of African countries is relatively low, and the construction of free trade zones on the continent is a positive development direction, which requires a series of broader and more strategic policy support, such as supporting measures in key areas such as emerging industries, foreign direct investment, scientific and technological innovation and labor market.

It is worth noting that more than 10 million young workers will be added to the African continent every year, and this number will increase significantly in the next 10 years. How to turn sufficient labor into a demographic dividend is of great concern. According to the report of the United Nations, poverty reduction, growth promotion and employment creation are inseparable. The transformation of the expansion of young labor force into a demographic dividend depends on the ability of countries to create a sufficient number of productive employment opportunities.. Experts suggested that African countries should, on the basis of expanding education expenditure, strive to solve the problem of education inequality, and give priority to increasing support for the poor and basic education. Other experts pointed out that Chinas investment and trade cooperation with Africa has been expanding, which has injected a strong impetus into Africas economic development. At present, 44 African countries and the African Union Commission have signed the one belt and one way cooperation document with China. China Africa Joint Construction of one belt and one road is in deep connection with the African Unions agenda for 2063, the United Nations Sustainable Development Agenda for 2030 and the development strategies of African countries. The deepening of China Africa practical cooperation will benefit both sides and benefit the whole world. Source: First Financial Editor: Chen Hequn, nb12679

It is worth noting that more than 10 million young workers will be added to the African continent every year, and this number will increase significantly in the next 10 years. How to turn sufficient labor into a demographic dividend is of great concern. According to the report of the United Nations, poverty reduction, growth promotion and employment creation are inseparable. The transformation of the expansion of young labor force into a demographic dividend depends on the ability of countries to create a sufficient number of productive employment opportunities..

Experts suggested that African countries should, on the basis of expanding education expenditure, strive to solve the problem of education inequality, and give priority to increasing support for the poor and basic education.

Other experts pointed out that Chinas investment and trade cooperation with Africa has been expanding, which has injected a strong impetus into Africas economic development. At present, 44 African countries and the African Union Commission have signed the one belt and one way cooperation document with China. China Africa Joint Construction of one belt and one road is in deep connection with the African Unions agenda for 2063, the United Nations Sustainable Development Agenda for 2030 and the development strategies of African countries. The deepening of China Africa practical cooperation will benefit both sides and benefit the whole world.