Ethiopia chapter - African Economic Outlook 2017

23 May 2017
image

Report Summary

The 16th edition of the African Economic Outlook highlights the fact that Africa’s economic performance is reflecting the perils of the global economy. The region’s real GDP growth slowed down to 2.2% in 2016, mainly due to the continued fall in commodity prices and weak global economic growth. East Africa was the fastest growing region at 5.3% real GDP growth, followed by North Africa at 3%. Growth in other regions was anaemic, ranging from a low of 0.4% in West Africa, dragged down by the recession in Nigeria, to 1.1% in Southern Africa, with South Africa, the region’s largest economy, posting only 0.3% growth.

With dynamic private sectors, entrepreneurial spirit and vast resources, Africa has
the potential to grow faster and more inclusively. The continent’s average growth is
expected to rebound to 3.4% in 2017, assuming that the recovery in commodity prices is sustained, the world economy is strengthened and domestic macroeconomic reforms are entrenched. In 2018, growth is expected to consolidate, expanding by 4.3%.


The composition of total financial flows to Africa reflects the dynamism of its
domestic markets. In 2017, inflows are projected at almost USD 180 billion. Remittances will reach USD 66.2 billion, up from USD 64.6 billion in 2016. Foreign direct investment inflows are expected to reach over USD 57 billion in 2017, supported mainly by greenfield investments from emerging economies. Tax revenue remains the most important source of domestic financing in African countries but has slowed with the decline in commodity prices. African countries will need to explore other options of mobilising domestic resources to minimise vulnerability of revenues to volatility in commodity prices.


Unlocking Africa’s less volatile sources of growth to spur human development will
require greater investment in human capital – such as in health, education and skills – stronger capacities to diversify financing and more effective efforts to promote structural transformation. Despite a decade of progress, 54% of the population in 46 African countries are still living in poverty. It is essential to double efforts to empower Africans with the necessary skills to promote development from the bottom up, driven by domestic innovation and investment. This is why the African Economic Outlook focuses this year on the role of entrepreneurs in Africa’s industrialisation.