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North African economy

For those looking for a sunny economic outlook, it might be worth a trip to North Africa.

Economic growth in Egypt, Morocco and Tunisia could surge as high as 6%-a-year, according to a new report from London-based firm Capital Economics. But they will only achieve that level with much-needed economic reforms the report’s author Jason Tuvey notes.

Egyptian President Abdel Fattah al-Sisi is urging investors to recognize the impact of reforms aimed at invigorating the country’s economy. Amr Abdallah Dalsh/Reuters

The reasons for the optimistic outlook are two-fold. The first is that these economies are starting from a lower base and could theoretically catch up to the richer ones more rapidly by implementing key technologies and focusing on high-productivity industries. Tuvey thinks that these three countries could easily surpass their historical average of 2-3% a year per-capita GDP growth and see their average GDP-per-person grow by 4-5% a year.

The second reason is that the three North African countries have a rapidly growing population, with the workforce set to grow by about 1% a year. Tuvey says that should add 1% to GDP just by new workers joining the workforce.

Combining the two figures, Capital Economics gets the outlook of 5-6% economic growth a year.

But the report warns that the key to continued growth will be government-led economic reform. “One of the key impediments to growth in recent years has been a low rate of investment, ” the report states. Establishing economic stability and improving what are seen as poor business environments should aid in pushing these economies “towards strong and sustainable growth.”

Source: blogs.wsj.com
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