Statistical Progress

Africa’s collective GDP is at least a third larger than officials say it is

May 20, 2014
May 20, 2014

According to official government statistics, the collective GDP of the African continent is somewhere around $1.5 trillion, roughly equal to that of Australia or a little less than that of Russia or Brazil. That number should be closer to $2 trillion, if not higher, according to the African Development Bank’s (AfDB) chief economist, Mthuli Ncube, speaking at the bank’s annual meeting this week in Kigali, Rwanda.

The basis for the higher estimate is the fact that dozens of African countries are using outdated metrics for calculating their economic output. Last month, Nigeria added 89% to its GDP, making it the biggest economy in Sub-Saharan Africa, when officials updated or “rebased” the country’s GDP to include things like a thriving local film industry, also known was “Nollywood,” and the telecom sector. Other countries like Ghana, Gambia and Guinea-Bissau have seen their GDP numbers expand by 60% or more because of rebasing.

Countries normally update their GDP calculation every five years, by changing which sectors are included and how they are weighted to reflect structural shifts in economic activity. But in Africa, only 10 out of 54 countries on the continent use a base year that’s within the last five years. Several countries are even using base years that are more than two decades old, according to AfDB. Ncube said that rebasing produces, on average, a 30% increase in GDP, and that economists at the bank believe the figure should be around $2 trillion.

The numbers support the idea that the African continent is not as poor as many have long believed, a point some economists have made. Though economic growth in the region hasn’t returned to pre-financial crisis levels, the region expects to see a record $80 billion in foreign investment this year; health and education are both improving on the continent, according to a report released this week from the bank.

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(African Economic Outlook)

But one drawback of a truer picture of various African economies is that it draws more attention to persistent income inequality. Economists say that fast economic growth hasn’t had as much of an impact on poverty reduction as was hoped. The AfDB estimates that more than 80% of the continent’s middle class—which has swelled to 326 million from 115 million in the 1980s—still lives on as little as $2 to $10 (paywall) a day and is vulnerable to slipping back into poverty.

After Nigeria rebased its economy, poverty levels fell from around 68% to 64% in 2010, but the country’s Gini coefficient, a measure of income where 100 represents maximum inequality, remained at around 49, among the world’s highest levels.

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