The basis for the higher estimate is the fact that dozens of African countries are using outdated metrics for calculating their economic output.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, The Gambia and Guinea-Bissau have seen their GDP numbers expanded 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.
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.
By Lily Kuo]]>