Economic Growth Prospects for Africa

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Economic Growth Prospects for Africa
Economic growth is a significant concept that researchers heavily focus on. It refers to the improvement or increase in the market value depending on services and goods in a given economy within a specific period (Acemoglu). Economic growth is determined based on the increase of GDP. The economic growth rate is also measurable depending on the trend of a country or region. Different factors determine economic growth. However, different actions such as labor and productivity positively drive economic growth. The emergence of new goods and services is necessary since they determine economic growth. Therefore, the more a country or a region produces more goods and services, the gross domestic product also increases. Economic growth also depends on different theories such as Classical and Malthusian theory, which shows the relationship between economic inputs and outputs. Economic growth aspects also play an essential role in determining whether a region is headed in the right direction. Economic growth prospects are factors that determine the economic outlook of a region. They are factors that also determine the ability of a specific region to grow exponentially by increasing the GDP.
Africa is one of the regions in the world with a rapidly growing economy. The region's population is approximately one billion (World Bank Group). It offers a unique natural and human resources that adequately eradicate poverty. Most Africans heavily rely on human resources, which strictly determine the region's economic growth influence. Africa is constantly creating a fundamental development path that harnesses different people and resources. The continent comprises high, middle, and low-income countries depending on natural resources. It also has specific states with a small population but heavily records higher economic growth.
The continent has faced significant challenges, such as pandemics affecting its economic outlook. Africa’s economic position heavily contracted in 2020 due to the emergence of the pandemic (World Bank Group). Nigeria and South Africa are two countries that heavily determine Africa's economic progress due to their large and rapidly growing economies. There is a strong connection between economic growth in Africa and its existing resources. The paper probes the economic growth prospects for Africa.
Economic Growth Prospects
Africa’s future relies on different factors which every researcher must understand. The region's future is significant since it determines its development position. Africa’s economic growth is based on different elements, including human resources, agriculture, industry, and trade. The identified factors are essential since they determine the future of economic stimulation.
Trade
Trade is one of the economic growth prospects for Africa. Trade-in Africa is a common phenomenon that has heavily determined African economic position and future. Intra-trade has catalyzed economic growth in Africa by creating different sources of employment. Most of the trade activities began in the 1960s when most of the states in Africa got their independence. Based on economic theory, trade positively impacts economic growth. Based on the economic aspect, a 1% increase in trade to GDP ratio increases the average GDP by approximately 0.5 % (Were). The trade-in Africa has heavily grown due to the increased expansion of mega trading partnerships and agreements. Most African countries have essentially focused on different trade agreements, thus leading to a positive trend with other countries, as shown in Table 1.
Regardless of many economic constraints in Africa, trade remains positive and heavily influences the region's economic growth. Trade openness continues to enlarge in Africa. Trade openness is the ability to successfully change goods and services across the countries or regions without any restriction (Were). Trade openness is also significant since it creates a better platform for the region to interact with other countries through different international links. Business links are necessary for promoting economic growth since countries can successfully exchange goods and services, and the countries can also create different partnerships for global expansion and growth. Therefore, trade openness is an essential aspect that significantly promotes economic growth in Africa.
Table 1: Annual Growth Rate between China and India with Africa
Source: Were, Maureen. "Differential effects of trade on economic growth and investment: A cross-country empirical investigation." Journal of African Trade vol. 2, 2015, pp. 1-2
Africa is also identified as a region with different trade opportunities and accounts for approximately 3% of the world's production. Increased production is necessary since it creates a better framework for exchanging the produced goods and services. It must be noted that the growth of any country is significantly based on how it can efficiently conduct itself and mobilize different trade resources. The significant economic gap that the region experience is poverty. However, it is easy to embrace economic development in all areas with effective trade. It is also to identify that the region's growth is not only based on trade but the trade links. The intra-trade has also increased by 15% due to constant resources mobilized by different countries such as South Africa and Nigeria (Were). High dependence on trade is also a significant determiner of the region’s growth since it allows the region to generate resources from different areas leading to higher economic growth. The Major trade issue that significantly impacts the region based on trade is some isolated markets. However, the markets can successfully be expanded with different trade drivers such as research and development.
Free trade is also a key aspect that has significantly contributed to Africa’s economic growth. Free trade involves the flow of goods and services in and out of the country without restriction. Free trade is essential since it creates a better ground for business development. Free trade has significantly opened Africa to other developed countries such as the United States, which actively determines the region’s approach to economic growth. Free trade has also allowed Africa to build significant regional economic communities leading to higher economic advancement. It also creates different economic bonds between the region and other regions such as Asia.
Additionally, due to the emergence of different regional economic communities, Africa has also signed different trade agreements, which offers a significant opportunity for economic diversification (Were). It is necessary to note specific trade forums which ensure that the region successfully generates incomes. The trade forums also allow the trade partners to work together and attain significant growth benefits. Some of the drivers who have promoted the trade forums are the regional leaders who adequately embrace different advancements in trade. Therefore, it is necessary to justify that trade is a significant element that shows the capacity of Africa in meeting different goals of economic growth.
Based on the economic outlook or projection regarding trade, Africa's continental free trade area (AfCFTA) is likely to elevate in 2035 by approximately 7% (World Bank Group). There is increased growth of trade depending on each country. For instance, Zimbabwe, one of the major countries in Africa, is likely to have higher growth than other countries due to increased incomes at 14%, as shown in figure 1. Additionally, only a few countries are likely to experience minimal growth of 2 %, such as Mozambique and Madagascar. Based on such evidence, the growth of Africa is paramount due to different trade diversification. The trade growth would also be evident due to increased TFA implementation and reduced non-tariff barriers.
Generally, by 2035, approximately 2.4% would be recorded at the continental level, which is a significant boost to the region (World Bank Group). Africa’s trade would significantly improve, thus promoting economic growth due to increased manufacturing in the continent. Total exports are likely to increase by approximately 29% due to the constant trend that the region is exposed to. Intercontinental growth is also likely to grow due to increased links with other countries. The identified figures result from the region's rapidly growing and economic transformation. Based on the economic perspective, higher intercontinental exports is significant since it creates a better platform for increased revenue flows and growth.
Furthermore, the AfCFTA agreement would significantly improve the growth of Africa due to increased productivity and output, which eventually lead to resource reconciliation in different African countries. Total production in a region would increase trade, which eventually promotes growth and development. Based on the 2035 projection Africa’s production is likely to increase by approximately 1.7%, with the manufacturing sector as the largest. The region would also experience different economic adjustments from the increasingly diversifying service sector (World Bank Group). It would create a better atmosphere for economic growth and transformation since manufacturing is becoming part and parcel of the distinct activities in Africa. In absolute terms, AfCFTA would create a better framework for most African countries to participate in service trade, thus leading to higher demand and production outputs. More tax revenues would also be generated due to AfCFTA from different sources.
One of the major revenue sources is the import tariffs that the region adequately receives. Import revenues are significant for the region's growth since they create a better source of economic stability. Revenue would also be generated from different liberations, which may focus not only on imports but also on exports. The process would eventually contribute to economic growth due to the increased opening market in most African countries. Based on the 2035 projection, Africa's revenues would increase by approximately 3% due to an increased baseline of the imports (World Bank Group). Therefore, it can be justified that one of the major economic growth for Africa is trade which results from different elements ranging from free trade, trade opennesss, and agreements.
Figure 1: Real income gains of African CountriesWorld
Source: "The African Continental Free Trade Area: Economic distributions and effects." World Bank Group, 2021, doi: 10.1596/978-1-4648-1559-1.
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