Are You Seeking a Strong Growth Economy? Look to North Africa


At a time when most of the news reports for large, industrialized nations seem mixed, at best, it may be time to look to other nations for investment opportunities. One surprising locale for big economic growth in the near future is North Africa.

This is surprising given the recent civil unrest and political turmoil several of these nations experience. Nevertheless, the economic outlook for several of these nations appears poised to surge in the second half of 2015. The Wall Street Journal reports that London-based financial firm Capital Economics has predicted a surge in economic output from Egypt, Morocco, and Tunisia that could reach as high as 6% this year.

Prediction Dependent on Reform

However, that prediction depends heavily on some anticipated reforms in each of those nations. According to the report, one of the biggest hindrances to growth in this region has been a lack of investment. The goal of establishing a strong and stable economy while simultaneously improving the reputation of these nations, as being friendly to business should help push these countries in the right direction for continued growth. This will require reforms aimed at both financial policies as well as political stability.

Quick Catch Up

One of the big reasons for Capital Economic's sunny prediction is that these economies are starting from a lower base. Theoretically, this could make it easier for them to catch up to with richer nations simply by focusing on supporting highly productive industry sectors and investing in key technologies and infrastructure.

According to the report, this could be the key to helping these nations jump out of their historic 2-3% annual GDP growth into a much more comfortable 4-5% per year.

Swelling Populations Will Help

Another ingredient in the anticipated success of Egypt, Morocco, and Tunisia is rapid population growth. This growth should swell each nation's workforce by approximately 1% each year. That, in turn, could help swell GDP by an additional percentage point thanks to increased production and domestic consumption.

Follow Through is Critical

While these numbers appear quite promising, analysts are not ready to call these nations a sure bet just yet. The real key to reaching growth in the 5-6% range will be each nation's actual commitment to the reforms necessary to achieve investment objectives. Although the global economic upheavals of the last decade have made investors a little more risk tolerant, it will take more than empty promises for political and fiscal reform to attract long-term investors. However, if these nations follow through on their plans, then their growth potential could be all but assured.