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2 Performance of the West African Economy: Stylized Facts

The performance of the economies in West Africa provides insights of the growth trajectory. It is important to mention up front that the absence of relevant data (for example, rates of unemployment, incidence of poverty etc.) on a consistent time series prevents a robust analysis of the performance of the economies of the sub-region. Tables 1 and 2 summarize the growth of GDP and its per capita measure during the period 2000–2013. The West African economy grew by almost 7 % in real terms in 2012 and the rate is projected to improve slightly in 2014 and 2015; these rates are higher than that of the African continent for the same period. For almost all the countries, the growth of output was robust except for Guinea, the Gambia and Niger. However, they recovered in 2013. During the period 2005– 2012, Sierra Leone registered the highest growth rate of 19.7 % followed by Burkina Faso, Ghana, Liberia and Nigeria. Guinea Bissau registered a negative growth rate of -1.2 % during the period 2000–2005 (see Table 3). During the period of the global economic downturn, almost all the countries had on the average positive growth rates except for Niger and Cote d'Ivoire which had negative growth rates of -4.7 % in 2011 and -0.9 % in 2009. In 2007, Ghana showed an output growth rate of 6.1 % at the height of the global economic crisis. The Gambia recorded 6.3 % while Liberia recorded 9.5 % during the same period. These growth rates were driven by high mineral and commodity export prices.

In terms of real GDP per capita, for the period 2005–2013, almost all the countries showed growth rates higher than that of the growth of population. The real GDP per capita growth for Sierra Leone which stood at 3.4 % in 2005 rose sharply to 17.8 % in 2012 but declined to 11.1 % in 2013; given that the growth of real GDP per capita is a proxy for development, does it imply that the economy of Sierra Leone is experiencing growth and development? Though growth must not only be double digit but must also be sustained for a reasonable period of time, whether growth has resulted in economic development is an empirical matter.

Table 1 Macroeconomic indices for West Africa

Source: African Development Bank. African Economic Outlook (2014)

Notes: aestimates, bprojections

Table 2 Real GDP growth for West African countries 2000–2013 (%)

Country

2000

2005

2012

2013

Benin

4.9 (1.9)

2.9 (-0.4)

5.4 (2.7)

5.0 (2.3)

Burkina Faso

1.3 (-1.6)

8.7 (5.7)

9.0 (6.1)

6.9 (4.1)

Cabo Verde

16.6 (14.7)

6.5 (5.5)

2.5 (1.7)

1.0 (0.1)

Cote d'Ivoire

-2.5 (-4.6)

1.8 (0.4)

9.8 (7.5)

8.8 (6.4)

Gambia

-27.3 (-30.2)

-0.9 (-4.1)

6.1 (2.9)

5.6 (2.4)

Ghana

3.8 (1.4)

5.9 (3.3)

7.9 (5.8)

4.4 (2.3)

Guinea

-5.6 (-7.3)

3.0 (0.9)

3.9 (1.3)

2.0 (-0.5)

Guinea Bissau

-35.8 (-38.0)

4.3 (2.1)

-1.5 (-3.9)

0.3 (-2.1)

Liberia

55.1 (49.8)

5.9 (3.2)

8.3 (5.6)

8.1 (5.6)

Mali

-4.7 (-7.5)

6.1 (3.0)

-1.2 (-4.2)

5.0 (2.0)

Niger

-2.9 (-6.5)

7.2 (3.5)

11.1 (7.3)

3.6 (-0.3)

Nigeria

6.3 (3.8)

6.5 (3.9)

6.7 (3.7)

7.4 (3.4)

Senegal

3.0 (0.5)

5.6 (2.9)

3.4 (0.5)

4.0 (1.1)

Sierra Leone

-23.3 (26.0)

7.3 (3.4)

19.7 (17.8)

13.0 (11.1)

Togo

-1.7 (-4.3)

1.2 (-1.4)

5.9 (3.3)

5.6 (3.1)

Source: African Development Bank

Notes: Real per capita GDP growth rate (%) is in parenthesis

Table 3 Growth of output in selected West African countries 2000–2011 (%)

Country

2000–2005

Average

2006

2007

2008

2009

2010

2011

Cape Verde

5.75

10.8

7.8

5.9

4.1

7.1

5.0

The Gambia

4.60

6.5

6.3

5.9

4.6

6.1

3.3

Ghana

4.80

6.4

6.1

7.2

3.5

6.4

13.6

Guinea

2.90

2.5

1.8

4.0

0.3

2.4

3.6

Liberia

7.8

9.5

7.1

4.6

6.8

6.4

Nigeria

5.30

6.1

6.4

5.3

5.6

6.4

7.2

Sierra Leone

12.10

7.4

6.4

5.5

4.0

6.0

5.3

Benin

3.6

4.6

5.0

2.7

3.8

3.1

Burkina Faso

4.90

5.5

3.6

5.0

3.2

5.2

5.6

Cote d'Ivoire

5.12

0.7

1.6

2.3

3.7

2.4

-4.7

Guinea-Bissau

-1.25

0.6

2.7

3.3

3.0

2.6

5.3

Mali

1.30

5.3

4.3

5.0

4.5

5.0

2.7

Niger

4.76

5.8

3.3

9.5

-0.9

4.9

2.3

Senegal

3.20

2.4

4.7

2.5

1.5

3.6

2.6

Togo

4.61

3.9

1.9

1.0

2.5

4.1

6.8

Source: WAIFEM annual report, various issues

The data on Table 4 show that all the economies experienced macroeconomic stability using the rate of inflation as a proxy. In 2005, Ghana, Guinea, Nigeria and Sierra Leone registered double-digits rates of inflation; all the other countries had single-digit rates of inflation. During the period of the global economic crisis (2007–2008), the same countries except Nigeria had double-digit inflation; except for Guinea, the rate of inflation for all the countries was within their inflation threshold (WAMI 2011). It is possible that both the growth in output and the acceptable rates of inflation were due to efforts by all the countries to better manage their economies. For example, in Nigeria, beginning in 1999, with the promulgation of both the Fiscal Responsibility and Procurement Acts, policy-makers relied more on rules than discretion. All the other countries passed Procurement Acts to ensure the proper management of contracts; the debt profile of most of the countries were within their acceptable thresholds of key debt indicators (Ekpo and Omoruyi 2013; Ekpo 2012a, b, c). Nonetheless, structural rigidities in these economies remain a challenge. It is important to state that all the Franco-phone speaking countries except Guinea registered very low rates of inflation; in 2009 and 2013, Senegal had deflation.

The fiscal side of the economies portrays a different picture. For the period, 2005, 2012 and 2013, all the countries except Mali had fiscal deficits. Some of the economies have huge infrastructure gap hence the need for increased capital expenditure which fueled the deficits; the observed deficits included grants, hence it would be necessary to examine how the deficits may result in fiscal dominance. Another disturbing trend is the evidence of twin deficits—fiscal deficit and negative current account/GDP ratio in all the countries except Nigeria. The negative current account/GDP confirms challenges with the balance of payments particularly the trade account of the affected countries (Table 5).

Table 4 Rate of inflation in selected West African countries (%)

Country

2005

2006

2007

2008

2009

2010

2011

2012

2013

Cabo Verde

0.4

4.8

4.4

6.8

1.2

2.1

4.5

2.5

1.5

The Gambia

5.0

2.1

5.4

4.5

4.6

5.0

4.8

4.2

5.0

Ghana

15.1

10.2

10.7

16.5

19.3

10.7

8.7

9.2

11.7

Guinea

31.4

34.7

22.9

18.4

4.7

15.5

21.5

15.2

11.9

Liberia

6.9

7.2

13.7

17.5

7.4

7.3

8.5

6.8

7.7

Nigeria

17.9

8.2

5.4

11.6

12.4

13.7

10.8

12.2

8.5

Sierra Leone

12.0

9.5

11.8

14.8

9.2

17.8

18.5

13.7

9.9

Benin

5.4

3.8

1.3

8.0

2.2

2.1

2.7

6.6

2.6

Burkina Faso

6.4

2.4

-0.2

10.7

2.6

-0.6

2.7

3.8

2.1

Cote d'Ivoire

3.9

2.6

1.9

6.3

1.0

1.4

1.9

2.0

2.7

Guinea-Bissau

5.6

-0.1

4.6

10.4

-1.7

1.1

5.0

2.1

1.0

Mali

6.4

1.5

9.1

11.3

2.2

1.3

3.1

5.3

0.3

Niger

7.8

0.1

0.1

11.3

4.3

0.9

2.9

0.5

1.9

Senegal

1.7

2.1

5.9

5.8

-1.1

1.2

3.4

2.1

0.7

Togo

6.8

2.2

1.0

8.7

2.0

3.2

3.6

2.6

1.8

Source: 2011 Annual Report, WAIFEM, Lagos

 
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