Friday, January 7, 2011

African economies finally growing

The Economist notes that 6 of the 10 fastest growing economies in the world were in Africa, and 7 of the 10 countries with the best predicted economic growth in the next 5 years are in Africa.  Three of the fastest 6 are big oil producers (Angola, Nigeria, and Chad - not a big oil producer yet but recently discovered oil so growing from a very low base) and Rwanda grew quickly because it was playing catchup from destroying its economy in the civil war.

Still, though, Africa has historically been somewhat of a basket case, so this is definitely good news.  But are these exceptions or is Africa as a region doing better?  The Economist article notes that Africa as a region did better than Latin America in the 2000s (although still trailed Asia), whereas Latin America grew faster than Africa in the 1990s.  So Africa is definitely doing much better than it has in the past, thanks to improved economic policies and so on.

One thing to note is that the Economist listed GDP growth, which is important for investors looking where growth is happening and to have an idea of which countries are increasing their economic weight on the world stage, but it's not the best measure if we want to know whether living standards are improving.  A better measure is GDP per capita, to account for population growth, and indeed African countries tend to have high population growth.

I just looked at real GDP growth rate and real GDP per capita growth rate for 2000-2007 because that's what was available in the Quality of Governance data set I have handy (I used the United Nations data). Here is what I got by region for countries with population over 10 million:

                                            Real GDP Growth         Real GDP per capita growth
Eastern Europe                                 6.1                                                6.1
Latin America                                  4.4                                                 3.1
North Africa & Middle East             4.6                                                2.7
Sub-Saharan Africa                          5.3                                                2.8
Western Europe & North America   2.3                                                1.6
East Asia (including Japan)              4.5                                                4.1
South-East Asia                                7.1                                                5.6
South Asia                                        7.8                                                5.7

(I haven't figured out how to put a nicer looking table on the blog yet)

So sub-Saharan Africa beat Latin America 5.3 to 4.4 in the 2000s if you look at GDP growth, but if you look at GDP per capita growth, Latin America did better.  But still, Africa did a lot better than it has in the past.  In the 1990s, GDP growth was 3.2% and GDP per capita growth was 0.4%, meaning in ten years, quality of life on average almost stood still. In the 1980s, GDP per capita growth was -0.9%.  So an average per capita growth rate of 2.8% is really good for Africa, historically speaking. I'll take it.

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