Date: Tue, 26 May 2015 12:54:44 +0200
Capital of Eritrea, Asmara
Africa will surpass most regions in spite of the global financial crisis, African economies will grow by 4.5 per cent in 2015 and may reach 5 per cent in 2016, converging with Asia’s current growth rates, according to the African Economic Outlook 2015.
The African Economic Outlook 2015 (AEO) is a report of collaborative work by the African Development Bank, the OECD Development Centre and the United Nations Development Programme.
With the African population set to triple by 2050, modernising local economies will be vital to make the continent more competitive and to increase people’s living standards, the African Development Bank said on Monday.
Eritrea’s real GDP growth is projected to continue increasing from 2.0% in 2014 to 2.1% in 2015, double the rate recorded in 2013, because of increasing investments in the mining sector.
The country’s current GDP is made of services 59.0 percent, non-manufacturing 17.2 percent, agriculture – forestry and fisheries 1.9 percent and industry 5.9 percent.
The Bank also said that over the medium term, the Government of Eritrea sees further prospects in improved trade with Middle-Eastern and Asian countries, additional mining activities, the growth of the food sector and the development of the tourist industry, the report said.
However, the bank also highlights that Eritrea’s aim to create a modern, private sector-led economy (Macro Policy 1994; National Indicative Development Plan 2014-2018) is compromised by an inadequately enabling investment and business environment, United Nations sanctions, and overall weak macroeconomic conditions.
Eritrea’s exports are forecasted to grow in 2014-15, due to mineral production at the Asmara project, but the current account balance is forecast to deteriorate from 0.2% of GDP in 2014 to -1.2% and -1.5% in 2015 and 2016 respectively, partly due to decreases in both remittances and the “development and recovery tax” (a 2% tax levied on the Eritrean diaspora).
The country’s growth outlook looks promising if Eritrea exploits all its opportunities for trade and opens to foreign investment other than in the mining sector, the report said.
Eritrea’s mining resources include arable land (26% of the total, but only 4% under cultivation) and minerals (copper, gold, iron ore, nickel, silica, sulphur, marble, granite and potash).
The report also said that growth will further benefit from a revitalised housing and construction sector, infrastructure development, and improved financial services. Agriculture, animal husbandry and fishing remain the mainstay of the economy, with approximately 70% of the population relying on this sector for their livelihoods.
The fact that over 80% of the poor live in rural areas and depend on agriculture suggests that increasing agricultural production and productivity would have a significant impact on poverty.
Overall, the Government of Eritrea has given priority to three pillars: human resource development, infrastructure development and food security in the forthcoming National Indicative Development Plan (NIDP) 2014-2018.
The report also said that the government is committed to engaging with countries to the East due to its geostrategic location and cost-effective means of doing business. Moreover, its long coastline could offer maritime services to countries in East and Central Africa as well.
Eritrea is said to have made progress in eliminating many restrictive policies, laying emphasis on creating favourable conditions for private-sector growth. In seeking food security, the government is also addressing social needs while rehabilitating productive infrastructures.
Eritrea’s isolation and weak inclusive institutions have undermined domestic and regional peace and stability, while UN sanctions have had a negative impact on the overall investment and business environment beyond the mining sector.
There is a need for continued dialogue at both the regional and international levels. Eritrea still believes that IGAD has a critical role to play in achieving regional peace and stability, and the country’s commitment to participate in the DRSLP is highly commendable, the Bank said.
Despite challenges to the development and recovery tax on the diaspora, its collection has continued though with a declining performance; private remittances are also being affected by the economic, investment and business environment.
“With the right policies, however, and building on the country’s rich human and mineral resource potential, Eritrea could rebound as the fastest growing country in the Horn of Africa”, the report says.