But African countries hoping to follow in the footsteps of India and China should be careful what they wish for
According to the IMF’s latest World Economic Outlook report published this month, Sub-Saharan Africa is forecast to grow by 5.6 per cent this year and 6.1 per cent next.
This is more than triple the forecast growth rate for the advanced economies of Europe, North America and Japan, and over four times the estimated growth rate for the UK. Only India and China are set to grow at a faster rate.
India and China’s impressive (if uncertain) growth forecasts are old news, but a list of the world’s fastest growing economies yields unexpected results. Can you guess which countries the IMF predicts will grow fastest in 2013-2017?
Related
If you listed (in order, from 1-10) Sao Tome and Principe, South Sudan, Guinea, Bhutan, Mongolia, Iraq, Timor-Leste, Libya, China and Papua New Guinea, you are right, and you probably cheated.
Of course, many of these countries are starting from a low base, they are emerging economies and many are recovering from war or revolution or recent independence. An investor keen to take advantage of this growth will have to tread carefully, research thoroughly and be prepared for sudden reversals.
The same could be said for investing in Sub-Saharan Africa more generally — but there’s reason to think that foreign investors, who are tired of the developed world’s stagnant growth rates, are increasingly willing to take risks and invest further afield. In 2011, inflows of foreign direct investment (FDI) to developing countries reached a new peak of $684 billion, and developing countries now account for half of all FDI inflows.
You could argue that this is all good news for Africa, a continent that would benefit from investment of all kinds. You might hope that Africa’s growth path will mirror that of India or China’s. But there are nevertheless worries — foreign investment, if not carefully managed, can lead to lopsided development, enriching elites but further alienating the ordinary people left behind.
Content from our partners
Read Spear’s columnist Robert Amsterdam on China’s investments in Africa
Both India and China have struggled to tackle poverty even while their GDPs have soared, and in the next few years they may well be forced to confront the limitations of this uneven growth. I hope that both foreign investors and policy makers across Sub-Saharan Africa will be watching very carefully.
Don’t miss out on the best of Spear’s articles – sign up to the Spear’s weekly newsletter
[related_companies]