Your first reaction to the title of this post may be: “Just when, for the first time in thirty years, Africa’s per capita GDP is growing (see Graph below) at the same rate as all developing countries, why are you asking whether Africa is growing too fast?” The reason is that we would like to know whether this growth is sustainable. Two colleagues at a recent conference on this topic offered some sobering thoughts. Drawing on his work on growth volatility. Jorge Arbache showed that it was mainly the resource-rich countries that had experienced an increase in growth accelerations and a decrease in decelerations.
He also pointed out that investment, often a strong predictor of future growth, had not increased significantly in Africa. Deepak Mishra showed that, despite about a decade of faster growth, manufacturing’s share of GDP (see Graph below) is the same as it was in the 1960s. Furthermore, African countries have the highest ratio of imports to exports, and the largest trade deficits.
Notwithstanding these important findings, I remain optimistic about Africa’s growth prospects. First, it is not just oil exporters that are experiencing faster growth. Some 17 non-oil-exporters, accounting for a third of the continent’s population, have experienced better than 4 percent GDP growth for a decade. Second, there is no question that macroeconomic management has improved. Whereas 26 African countries were suffering from 20% inflation in the early 1990s, as of end-2007 only one—Zimbabwe—was. Finally, while there remains a huge, unfinished agenda of policy and institutional reforms to sustain growth, nothing succeeds like success. The fact that some of these reforms are generating growth creates a certain momentum—by opening the political space for further, and possibly more difficult, reforms.