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Friday, 10 October 2014

The silly GDP growth yard stick of the world bank: The IMF Says The World's In A Mess - But Not Africa: But what is the use of economic growth without equitable economic growth distribution



My analysis
When will the World Bank stop this nonsense about economic growth. Of course, economic growth is a necessary but  not a  sufficient condition for development. We must move away from economic growth accumulation (economic development) to economic growth distribution(human development). There was certainly a lot of growth during Gadaffi’s Libya –but can we call that meaningful development . The best countries to be such as; Norway, Denmark and Sweden are not ranked basing on economic growth per se but rather by economic growth distribution(human development). 

The IMF Says The World's In A Mess - But Not Africa

The IMF’s latest World Economic Outlook makes sobering reading for most of the world. Headlines have focused on the IMF’s warning that the world economy may never return to the pace of expansion it enjoyed before the global financial crisis; in the meantime, it has cut its global growth forecasts for 2014 to 3.3% and for 2015 to 3.8%, both of them downgrades from previous expectations.
But there’s a bright side: Africa.

The most readable emerging markets economist, Charles Robertson of Renaissance Capital, had this to say this morning. “The IMF 6-monthly release of economic data is a little dose of heaven to this economist. The world can focus on gloomy headlines about the IMF downgrading its projections, but… there are growth stories: They’re in Africa, which is taking the lead from Asia.”
You can download the IMF report here. It includes figures on projected real GDP percentage growth in 2014, and a close look at the data shows why Robertson is so excited: six of the the top 10 countries, and 11 of the top 20, are in Africa. While Asian countries are still in there – in fact, the top 19 are all in Africa or Asia – they are no longer the majority.
They are perhaps not the obvious names. Most portfolio investment into Africa goes into South Africa or, more recently, Nigeria, with Egypt popular pre-revolution, Kenya and Ghana attracting increasing attention, and Morocco occasionally favoured despite its modest stock market size. None of those countries appear in the top 10; Nigeria, the only one in the top 20, ranks 17th. Instead, we have oil and gas stories (Chad and Mozambique – plus, outside of Africa, the number one country on the list, weird and wonderful Turkmenistan), mining plays (The DRC and Sierra Leone), soft commodities (Cote d’Ivoire) and, a relative outlier, Ethopia, which Robertson calls “more an investment led story driven by the government”. Incidentally, the Asian countries rounding out the top 10 are a resource play (Mongolia), an emergence play (Myanmar) – and China, which ranks 10th, at 7.4% growth. Looking at African countries elsewhere in the top 20, aside from established Nigeria (now officially the 21st largest economy in the world following the rebasing of its GDP), there is a newly opened market (Tanzania), and countries at either end of the wealth and education spectrum, The Gambia at one end, Mauritania and Burkina Faso at the other.  Overall, sub-Saharan Africa grew by 5.1% in 2013, and the IMF projects it to hit the same figure in 2014 and 5.8% in 2015.

The IMF says: “Economic activity in sub-Saharan Africa has continued to grow robustly – on the back of supportive external demand conditions and strong growth in public and private investment – and the outlook is elected to remain favourable for the lion’s share of the region’s countries.”
All well and good. But two points occur. One, strong economic growth does not automatically equate to a positive experience for investors. And two… Ebola.

To take the second point first, nobody really knows how bad Ebola could be. The IMF, whose blunt tone must be forgiven in what is, after all, an economic report, writes: “Beyond the severe humanitarian implications, the ongoing outbreak of the Ebola virus is exacting a heavy economic toll in Guinea, Liberia and Sierra Leone.” The man who discovered Ebola back in the 1970s, Dr Peter Piot, was quoted this week as saying: “I am so worried about Nigeria as well. The country is home to mega-cities like Lagos and Port Harcourt, and if the Ebola virus lodges there and begins to spread, it would be an unimaginable catastrophe.”
Even without that, African countries face other challenges. The IMF highlights a rapid buildup of fiscal vulnerabilities in a few countries, increasing security threats, and the risk caused by a tightening in global financing conditions (which is always a possibility when the US starts raising interest rates again).
Despite these issues, portfolio flows in both debt and equity in recent years have demonstrated renewed enthusiasm for exposure to Africa. In the bond market, for example, one sovereign after another has brought a bond to the international markets and found it heavily oversubscribed, recent examples being Kenya and Cote d’Ivoire.

Every country is different, of course; speaking of Africa as a homogenous continent makes no sense at all, given the combination of relatively mature middle-income countries like South Africa, oil-rich countries in turmoil like Libya, densely populated West African countries, places with dire security situations like the Central African Republic and South Sudan, and post-war rebounds like Angola and Mozambique. The successful investor will need to distinguish the opportunities from the duds. “In many countries,” writes the IMF, “activity will continue to benefit from the boost generated by infrastructure projects, the expansion of productive capacity, buoyant services sectors, a rebound in agricultural production, or combinations of those factors. In some middle income countries and oil exporters, however, the picture is more mixed. In South Africa, a muted recovery is expected to take hold only in 2015.”

It’s a market that many investors are only prepared to venture into through mutual funds, whether debt or equity, with a clear focus on on-the-ground expertise. There’s no question Africa presents enormous investment opportunity, but finding the best way to play it is, for the moment, a professional’s game.

Legacies, Clouds, Uncertainties

October 2014

Despite setbacks, an uneven global recovery continues. Largely due to weaker-than-expected global activity in the first half of 2014, the growth forecast for the world economy has been revised downward to 3.3 percent for this year, 0.4 percentage point lower than in the April 2014 World Economic Outlook (WEO). The global growth projection for 2015 was lowered to 3.8 percent.
Downside risks have increased since the spring. Shortterm risks include a worsening of geopolitical tensions and a reversal of recent risk spread and volatility compression in financial markets. Medium-term risks include stagnation and low potential growth in advanced economies and a decline in potential growth in emerging markets.
Given these increased risks, raising actual and potential growth must remain a priority. In advanced economies, this will require continued support from monetary policy and fiscal adjustment attuned in pace and composition to supporting both the recovery and longterm growth. In a number of economies, an increase in public infrastructure investment can also provide support to demand in the short term and help boost potential output in the medium term. In emerging markets, the scope for macroeconomic policies to support growth if needed varies across countries and regions, but space is limited in countries with external vulnerabilities. And in advanced economies as well as emerging market and developing economies, there is a general, urgent need for structural reforms to strengthen growth potential or make growth more sustainable.


  • Assumptions
  • What's New
  • Data and Conventions
  • Classification of Countries
  • General Features and Composition of Groups in the World Economic Outlook Classification
  • Table A. Classification by World Economic Outlook Groups and Their Shares in Aggregate GDP, Exports of Goods and Services, and Population, 2013
  • Table B. Advanced Economies by Subgroup
  • Table C. European Union
  • Table D. Emerging Market and Developing Economies by Region and Main Source of Export Earnings
  • Table E. Emerging Market and Developing Economies by Region, Net External Position, Status as Heavily Indebted Poor Countries, and Low-Income Developing Countries
  • Table F. Key Data Documentation
  • Box A1. Economic Policy Assumptions Underlying the Projections for Selected Economies
List of Tables Part A (Download PDF)
A1. Summary of World Output
A2. Advanced Economies: Real GDP and Total Domestic Demand
A3. Advanced Economies: Components of Real GDP
A4. Emerging Market and Developing Economies: Real GDP
A5. Summary of Inflation
A6. Advanced Economies: Consumer Prices
A7. Emerging Market and Developing Economies: Consumer Prices
A8. Major Advanced Economies: General Government Fiscal Balances and Debt
A9. Summary of World Trade Volumes and Prices
A10. Summary of Current Account Balances
A11. Advanced Economies: Balance on Current Account
A12. Emerging Market and Developing Economies: Balance on Current Account
A13. Summary of Financial Account Balances
A14. Summary of Net Lending and Borrowing
A15. Summary of World Medium-Term Baseline Scenario
List of Tables Part B (Download PDF - available on the web only)
B1. Advanced Economies: Unemployment, Employment, and Real GDP per Capita
B2. Emerging Market and Developing Economies: Real GDP
B3. Advanced Economies: Hourly Earnings, Productivity, and Unit Labor Costs in Manufacturing
B4. Emerging Market and Developing Economies: Consumer Prices
B5. Summary of Fiscal and Financial Indicators
B6. Advanced Economies: General and Central Government Net Lending/Borrowing and Excluding Social Security Schemes
B7. Advanced Economies: General Government Structural Balances
B8. Emerging Market and Developing Economies: General Government Net Lending/ Borrowing and Overall Fiscal Balance
B9. Emerging Market and Developing Economies: General Government Net Lending/ Borrowing
B10. Advanced Economies: Exchange Rates
B11. Emerging Market and Developing Economies: Broad Money Aggregates
B12. Advanced Economies: Export Volumes, Import Volumes, and Terms of Trade in Goods and Services
B13. Emerging Market and Developing Economies by Region: Total Trade in Goods
B14. Emerging Market and Developing Economies by Source of Export Earnings: Total Trade in Goods
B15. Summary of Current Account Transactions
B16. Summary of External Debt and Debt Service
B17. Emerging Market and Developing Economies by Region: External Debt by Maturity and Type of Creditor
B18. Emerging Market and Developing Economies by Analytical Criteria: External Debt by Maturity and Type of Creditor
B19. Emerging Market and Developing Economies: Ratio of External Debt to GDP
B20. Emerging Market and Developing Economies: Debt-Service Ratios
B21. Emerging Market and Developing Economies, Medium-Term Baseline Scenario: Selected Economic Indicators

World Economic Outlook, Selected Topics

African economies growing stronger – World Bank

Publish Date: Oct 09, 2014
African economies growing stronger – World Bank

Despite weaker than expected global growth and stable or declining commodity prices, African economies continue to expand at a moderately rapid pace, the World Bank has said.

The African regional Gross Domestic Product (GDP) is projected to strengthen to 5.2% yearly in 2015-16 from 4.6% in 2014.

This is according to the World Bank’s new Africa’s Pulse, a twice-a year analysis of the issues shaping Africa’s economic prospects.

Significant public investment in infrastructure, increased agricultural production and expanding services in African retail, telecoms, transportation, and finance, are expected to continue to boost growth in the region.

This pick-up in growth is expected to occur in a context of lower commodity prices and lower foreign direct investment as a result of subdued global economic conditions.

Commodity prices remain highly significant to Africa’s outlook since, as the report notes, “primary commodities continue to account for threequarters of sub-Saharan Africa’s goods exports and the share of the region’s top five exports has climbed to 60% in 2013 from 41 % in 1995.”

“Overall, Africa is forecast to remain one of the world’s three fastest growing regions and to maintain its impressive 20 years of continuous expansion,” says Francisco Ferreira, the World Bank’s chief economist for Africa.

“Downside risks that require enhanced preparedness include rising fiscal deficits in a number of countries; economic fallouts from the activities of terrorist groups such as Boko Haram and al-Shabaab and, most urgently, the onslaught of the Ebola epidemic in West Africa.”

 A World Bank study of the likely economic impact of Ebola, released last month, suggested that if the virus continues to spread, its economic impact could grow eight-fold.

Ugandan economy seen picking up steam, says IMF

Uganda’s economy expands by 5.7%