Saturday, December 24, 2011

Contrasting Income Growth for Africa and Asia

Keen observers of the growth trajectories of countries cannot help noticing that apart from the larger economies in Asia, sub-saharan africa has registered unprecedented growth levels in the last decade. The argument is relevant because one of the major problems that the latter region has had is the inability to hold on to an upward growth momentum for meaningful periods of time. Instead, Africa's example has been fluctuations of growth rates that coincide with commodity price changes. The summary of this experience from the mid-1970s is that dependence of petroleum and agriculture-based commodities is not a reliable path to growth and improvement of welfare.?

And that's why the contention is that it is yet not possible to state with confidence that sub-saharan Africa has overcome the mix of economic and political problems that it faces. That brings me to this fascinating article in the East African which makes the credible and well-based claim that the countries in the eastern region of africa will be leaders in overall growth in the coming two decades. It is an article worthy of reading because it is based on a complicated but sensible method for assessment of the complexity of an economy and concludes that the countries of the region under reference have economies that are more complex and diverse in production than is warranted by the incomes today.?

The author of the article concentrates on a list of manufacturing firms to illustrate the claim derived from the index of complexity. it is less clear to me that all these firms confer a comparative advantage to the region because it is unlikely that all are able to compete internationally. My view is that given the fact that manufacturing industry is a smaller proportion of the overall GDP of these countries, there is scope for growth but not?necessarily?for all existing firms. A final point that is worthy of note is that in spite of the prediction that the region will lead in GDP growth, it will still fall behind India and China in respect of per capita income growth. I think the reason is that this region has a large and youthful population and is expected to maintain strong moderately population growth for a few more decades. ?

Source: http://bookishposts.blogspot.com/2011/12/contrasting-income-growth-for-africa.html

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