South Africa retakes the title of Africa’s biggest economy from Nigeria but for how long?
South Africa have had a difficult few years recently, losing their title of Africa’s biggest economy in 2014 when Nigeria rebased its GDP data, and then in May 2016 they lost their position as the second biggest African economy to Egypt. Egypt however only managed to maintain their newly acquired position for less than two months, as South Africa reclaimed it in June 2016. South Africa’s improving performance in conjunction with Nigeria’s recent struggles have now resulted in South Africa reclaiming its position as Africa’s biggest economy, over two years after having lost it.
International Monetary Fund (IMF)
Whilst South Africa’s GDP is still contracting, its contraction has not been as significant as the contraction being seen in Nigeria. The most recent statistics released by the IMF has stated that South Africa’s economy is now worth $301 billion, $5 billion more than Nigeria’s.
The last few years have been tough for Nigeria as their GDP has continued to shrink. Their difficulties can be attributed to the continuing decline in oil prices, in addition to other commodity prices, and its shortage of foreign currency. The 30% reduction in the value of its currency is also having a significant impact on the country’s recent poor economic performance, particularly at a time when the rand has strengthened its position, gaining over 16% against the US dollar since the beginning of 2016, a 10 month high.
An economist at Exotix Partners LLP, recently reiterated the impact the success or failure of a countries currency could have on their overall GDP growth or shrinkage, and how this is particularly relevant for Africa’s largest economic countries at the moment. Alan Cameron said, “More than the growth outlook, in the short term the ranking of these economies is likely to be determined by exchange rate movements,”.
He continued by saying that he believed Nigeria would soon regain the top spot it first claimed from South Africa in 2014, but that their ability to be able to retain this position would be in question, “the momentum that took it there in the first place is now long gone.”.
Despite South Africa’s improved economic position and the significant growth in the value of its currency, it still faces the risk of recession, just as Nigeria does, as both of their economies are still in decline. Whilst the issues in Nigeria are largely due to oil prices and their struggling currency, the reduction in South Africa’s GDP is being blamed on a significant decline in the current output from both their mining and farming sectors.
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