African economies face gaps in macroeconomic modeling capacity despite progress, new AfDB study says

African countries still face significant capacity gaps in macroeconomic modeling, despite the huge strides they have made in terms of forecasting, analysis, and effective policy management, a new African Development Bank Group study has found.

The report, Benchmark Macroeconomic Models for Effective Policy Management in Africa, was launched in the Ethiopian capital Addis Ababa by the Bank Group’s African Development Institute on 18 November on the sidelines of the African Economic Conference 2023.

The study surveyed 31 of 54 African countries. To undertake the research, the Bank Group partnered with Central Banks and Ministries of Finance and Planning, with support from the Nairobi-based African Economic Research Consortium.

Prof. Kevin Chika Urama, the Bank’s Chief Economist and Vice President for Economic Governance and Knowledge Management, said the report provides an inventory of models and modelling capacity in African countries and examines their relevance to development realities as the continent faces recurrent challenges.

He stressed the importance of macroeconomic models as tools for countries to effectively understand and predict the behaviour of their economies.

“But models are only attempts to simplify realities in a logical manner to inform decision-making under specific assumptions, contexts and realities,” Urama said. “Models are therefore as relevant as the extent to which they approximate realities and can inform appropriate decision making in specific contexts.”

Speaking at the launch, Shalom Gebredingel, Chief of Staff and Special Advisor to Ethiopia’s Minister for Planning and Development, said the report was more than a collection of data.

“It represents a shared commitment to transformative change. It is a call to action, urging us to rethink our approach, question assumptions and embrace innovation in our policy endeavors,” she said.

Africa has grappled with formidable challenges, including the COVID-19 pandemic, Russia’s invasion of Ukraine, as well as climate change and its impacts in the form of droughts and flooding, Gebredingel said.

Such challenges highlight “the crucial emphasis for policymakers to comprehend as well as skillfully navigate the intricate interplay of global, regional and local dynamics of our economies,” she said.

Dr. Eric Ogunleye, the African Development Institute’s Division Manager for the Policy Management Division presented the findings of the study.

Its main objectives were to undertake a stocktaking of the types of models that are available in African countries, and assess how operational and fit for purpose they are, Ogunleye said.

The Africa Development Bank Group, he explained, is keen to ensure that its capacity development initiatives in member countries are demand-driven and based on their specific realities and contexts.

“Before we think about defining any macroeconomic management capacity development initiative to support our regional member countries, we deem it fit to have first-hand understanding of the issues and capacity gaps on the ground and that was the motivation for this study,” he said.

The Africa Economic Conference took place from 16–18 November 2023 in Addis Ababa under the theme “Imperatives for Sustainable Industrial Development in Africa”.

Organised by the African Development Bank, the United Nations Economic Commission for Africa and the United Nations Development Programme, the 18th edition of the conference brought together experts, the private sector, researchers, and young people to discuss the challenges and prospects of industrialization in Africa.