Economic Outlook For Africa's Strongest Economies

Africa’s strongest economies usually have an effect on other states around them both negative and positive but if these economies are performing positively this will mean the dependent states will also be impacted positively by the outcome. In this report we will be focusing on three states Kenya, Nigeria and South Africa the strongest economies in East, West and South regions of Africa. Economic forecasts have been revised downwards for most states in Africa due to many challenges that have been stifling growth such as low commodity prices underperforming European and the USA economies which are attributable to global challenges.

East African growth has been pioneered by the boom in the Kenyan economy which has performed well in sectors such as Agriculture and Tourism which have contributed immensely to the country’s GDP thereby leading to an increase in growth. The central bank of Kenya will be expected to keep their interest rates constant as they try to contain the country’s inflation within the forecasted range but at the same time not disturbing the forecasted economic growth. They might face challenges in their quest for contaning inflation without affecting growth as their economic growth has been forecasted downwards from 5.1 percent to 4.7 percent and this will mean more measures to be kept in place if growth has to be achieved. The country’s main risk factors that are affecting growth at the moment are terrorism and uncertainty of the agriculture rainfall. The first risk factor of terrorism can be avoided but it will take a lot from the government to counteract it as it seems to be growing. This risk factor will and has already affected tourism which has in the past contributed one billion dollars per year towards the country’s GDP. Kenya one of the biggest growers and producers of tea will have their agriculture season affected by the current delay in the rainfall and this will affect the agriculture sector’s contribution to the country’s GDP which usually has a contribution of a fifth to the GDP. The government should also keep improving on trade and services, and Information technology which have been tapped into by Nigerian and has improved the economy when other sectors were lagging behind.

Nigeria the largest economy in Africa keeps improving and tapping into other sectors which have rallied on the growth of its economy rather than depend mainly on the contribution of the Oil sector. The country despite its growth is still bedevilled by the high unemployment rate and the growing disparity between the rich and the poor. Poverty is still rife in some states of Nigeria and the government should keep introducing innovative measures such as the Agriculture transformation policy among others to curtail the scourge and improve the living standards of the those states . Oil has been the bedrock of the Nigerian economy but the decline in its contribution to the sector has been worrying. Terror groups continue to affect the production of Oil and if no solution is brought up the contributions will continue to decline and in the long run this will affect massively the growth of Africa’s largest economy. The north east region continues to be afflicted with conflict and the continued rise of Boko Haram has increased the terror risk in Nigeria. Despite all these challenges growth in agriculture, Information Technology, trade and services has seen a rapid rise in the economy as the economy becomes more diverse and none reliant on the Oil contributions. Diversity in the country’s economy will mean that risk brought about by other sectors will be reduced as risk is spread among many different sectors.

The second largest economy in Africa which had its spot taken by Nigeria, South Africa continues to realise growth but it keeps going down. The country at the moment is slowly drifting into stagflation and the upcoming governor’s statement on the economy and the budget must do enough to instil confidence back on the economy if it does not want to slip into that zone. Growth has been slowing down and already inflation is going beyond the central bank’s targeted range and the country’s economic growth has been revised downwards much of knock on confidence towards the economy. The country has been riddled of late by an increase in labour unrest in the major economic sectors and this is slowly having a huge impact on the GDP and economy at large. The country has been experiencing a 5 month long mining sector industrial action which also affected the global market as South Africa is one of the biggest producers of minerals. Mining production fell by 25 percent and experts are still expecting the production to go down still as the labour unrests have become synonymous with the sector. Fresh unrests have also caught on to the other sectors such as the steel and manufacturing industries, very soon other sectors will be catching on and this in its own essence for investors should now be viewed as a major risk as it affects the business in terms of wage costs and disrupted production. The country’s high current account deficit is also a worrying factor as there is need for it to be reduced timeously before it has a huge negative impact. The credit rating agencies have also downgraded the credit worthiness of the country and this is also a knock on the country’s economic confidence. The weakening rand which has affected local businesses might boost exports and thereby reduce the high current account deficit as the exports are now cheaper. Despite all these challenges growth is forecasted at 2.7 percent and the government together with the private sector should engage and look for ways to stop the rise of labour unrests.