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Recent African Growth: What Changed, What's Matter?

Abdoul Mijiyawa, African Centre for Economic Transformation, Ghana

This paper analyses factors related to the recent economic growth in Africa. It also analyses the dynamics of economic growth and its determinants within Africa as compared with East Asia. The data reveal that, during the period 1995-2005, Africa caught up with East Asia in terms of economic growth. The data also reveal that Africa reduced its lag relative to East Asia in terms of investment rate.

However, East Asia has maintained and even improved its advantage on Africa in terms of GDP per capita, government effectiveness, primary education, export rate, domestic credit to the private sector, and the rate of urbanization. Within Africa, economic growth rate is 2.2 percent points higher during the period 1995-2005 compared to the period 1975-94. The data show that only three growth correlates (i.e., primary education, export rate, and urbanisation rate) have significantly improved over time. For the other growth correlates, they have either slightly deteriorated or been stagnant in Africa.

The results of growth regressions over the period 1995-2005 show that investment, access by  the private sector to domestic credit, government effectiveness, exports, and share of agriculture value added in GDP are positively linked to economic growth. Thus, compared to the results of statistical analyses, the results of growth regressions suggest that most of the variables which positively contributed to the recent economic growth are not those variables which positively evolved in Africa.

The good news is that African countries have been able to grow recently without changing many growth fundamentals. The bad news is that African countries need to refocus their efforts on the “right” economic fundamentals, i.e., variables which significantly contribute to economic growth; otherwise the recent growth recovery may not be sustainable in Africa.