African Development Bank releases highlights of its Purchasing Power Parities report

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The African Development Bank Group has published highlights of its purchasing power parities (PPP) findings for Africa, following the International Comparison Program (ICP)’s release of its 2021 and revised 2017 results on May 30th.

The ICP is a worldwide statistical partnership which produces purchasing power parities and comparative price levels for participating economies to compare their size of Gross Domestic Product (GDP) and its main components internationally, taking account of differences in price levels.

The African Development Bank was the regional implementing agency for Africa and funded the activities of the 2021 ICP on the continent through its Multinational Statistical Capacity Building Program (SCB) with resources mobilized from the African Development Fund, the Bank Group’s concessional lending window. This is the fourth time the Bank has funded the production of PPPs across Regional Member Countries, coordinated entirely in Africa.

Highlights

  • Africa represents 5.4% of the world’s Gross Domestic Product (GDP) in PPP Terms and 18.5% of the world’s total population.
  • Egypt continues to be ahead of Nigeria as Africa’s biggest economy in purchasing power parities (PPP) terms for the 2021 Round.
  • The 2021 ICP results show, in PPP terms, that the African economy expanded by 28.51 % from 2017 benchmark; and the continent share to the global investments reached 3.27% from 2.4% in 2017.
  • The world’s largest economy in 2021 was China, with a GDP-PPP of 28.8 trillion dollars, representing 18.9% of global GDP. The United States occupied the second position with 15.5% of world GDP. India ranked third, with 7.2%.

In 2021 52 African countries signed up for the program and effectively implemented all the activities. While only 50 countries fully participated in the 2017 round, Somalia and South Sudan were added in the 2021 round. With 52 countries, Africa has the biggest share of participating countries (29.5%) out of the total 176 countries globally.

Regional and Global Economies

As in 2017, Egypt has again surpassed Nigeria as the largest economy in Africa with a GDP of $1.9 trillion in Purchasing Power Parity (PPP) terms, the latest International Comparison Program for Africa (ICP-Africa) of reference 2021 data shows.

Nigeria, the continent’s most populous nation, comes second with a GDP-PPP level of $1.2 trillion, followed by South Africa at $844.7 billion, according to the 2021 ICP results generated by the African Development Bank. Among the five largest economies in the region was Algeria ($569.6 billion and Ethiopia ($382.3 billion).

In market exchange rates terms, Egypt GDP with $462.9 billion remains the largest continental economy seconded by Nigeria ($438.9 billion. Among the five top African economies are South Africa ($421.6 billion), Algeria ($163.5 billion) and Morrocco ($141.8 billion).

The shares to Africa total GDP-PPP of the largest economies are Egypt (22.9%), Nigeria (14.7%), South Africa (10.3%), Algeria (7.0%) and Ethiopia (4.7%).

Overall, the results reveal that the African economy produced goods and services worth about $8.2 trillion in 2021, representing only 5.4% of the world’s output and the size of the African economy measured in PPP terms was 28.51% bigger than in 2017. The five largest economies in Africa (Egypt, Nigeria, South Africa, Algeria, and Ethiopia) together account for 59.5% of the continent’s GDP.  Results further show that the continent output was dominated by twelve countries, Egypt, Nigeria, South Africa, Algeria, Ethiopia, Angola, Côte d’Ivoire, Ghana, Kenya, Morocco,  Sudan, and Tanzania, which collectively accounted for 75% of Africa’s GDP in PPP terms.

Thirty-six African countries individually accounted for less than 1% of the region’s output and collectively accounted for 13.04 % of the region’s total GDP-PPP.

Regional GDP-PPP per Capita

The report also provides GDP per capita for 52 African economies.

Measured in real GDP-PPP per capita, the five richest countries in Africa are Seychelles ($29,711.9), Mauritius ($22,246.1), Gabon ($19,546.4), Equatorial Guinea ($18,180.2), and Egypt ($17,158.4).  The top ten countries include Botswana ($16,651.5), South Africa ($14,222.7), Algeria ($12,893.2), Tunisia ($12,159.1) and Namibia ($10,705.2). Except Egypt, South Africa, Algeria, and Tunisia, the remaining six countries have a small population between 0.11 and 2.59 million and their share in real terms of the regional output varies from 0.06 to 0.7%.

Less than one-quarter (19.2%) of African countries had a real GDP per capita of less than $2,000. Burundi is the only country that had less than $1,000. The five non-rich economies are Burundi ($981), Central African Republic ($1,085), Somalia ($1,134), Mozambique ($1,440) and Niger (1,538).

Which countries are the most expensive?

The price level index (PLI) is the ratio of a country’s PPP to the exchange rate of its currency to the U.S. dollar. PLIs provide a comparison of the countries’ overall price levels with respect to Africa’s average. A PLI greater than 1 means that prices are higher than the region’s average, and a PLI less than 1 means that prices are relatively lower than the region’s average.

Zimbabwe had the highest price levels on the continent followed by Cabo Verde, Djibouti, Seychelles, and South Africa. Price levels are lowest in Sudan, Egypt, Angola, and Ethiopia.

Investment expenditures

At 21.3 %, Nigeria has the largest share of Africa expenditures on investments (defined as defined by gross fixed capital formation), followed by Egypt (12.10%), Algeria (10.30%), South Africa ( 9.30%), Morocco (6.0%). In the ten top countries was also Ethiopia (4.02%), Tanzania (3.9%), Kenya (3.5%), Ghana (2.49%) and Côte d’Ivoire (2.46%). This group represents 75.4% of Africa total investments. Nigeria accounted also for 30.4 % of investment in Sub-Saharan Africa, followed by South Africa (13.3%).

35 out of 52 Countries individually had less than 1% share collectively accounting for 12.5% of Africa total investments.

The 2021 ICP-Africa results will be used for comparing regional poverty incidences and analyzing poverty across countries and revising international poverty thresholds. They can also be used in the investment and employment decisions of various economic agents.

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