Overview of Recent Economic and Social Conditions in Africa

Economic Commission for AfricaEconomic Commission for Africa

Addis AbabaAddis Ababa

Outline of Presentation

Africa’s Recent Economic PerformanceAfrica’s Recent Economic Performance Comparison Across RegionsComparison Across Regions Explanations for Africa’s Economic Explanations for Africa’s Economic

PerformancePerformance Relation to the Millennium Development Relation to the Millennium Development

GoalsGoals The Way ForwardThe Way Forward

Africa’s Recent Economic Performance

Relative to the 1980s and the early 1990s, there Relative to the 1980s and the early 1990s, there has been an improvement in Africa’s economic has been an improvement in Africa’s economic performanceperformance

Annual average growth rate of real GDP was Annual average growth rate of real GDP was 2.1% over the period 1980-90; 5.4% in 1995-96; 2.1% over the period 1980-90; 5.4% in 1995-96; and 3.2% in 2000-2001and 3.2% in 2000-2001

In 2003, real GDP growth rate in the region was In 2003, real GDP growth rate in the region was 3.6%, up from 3.2% in 2002.3.6%, up from 3.2% in 2002.

….distribution of the 2003 growth rate is uneven across sub-regions

3.6

2.5

2.5

3.6

3.7

4.7

0.0 1.0 2.0 3.0 4.0 5.0

percent

AFRICA

Southern Africa

East Africa

West Africa

Central Africa

North Africa

How does Africa’s economic Performance Compare to those of other regions?

  2002 2003

World Output 3.0 3.9

United States 2.2 3.1

Euro Area 0.9 0.4

Japan -0.3 2.7

United Kingdom 1.7 2.3

Brazil 1.9 -0.2

China 8.0 9.1

India 4.7 7.4

Africa 3.2 3.6

Explaining Africa’s Economic Performance

As in the past, global and domestic factors As in the past, global and domestic factors account for Africa’s recent economic account for Africa’s recent economic performanceperformance

Global Factors

Strengthening of growth in the global economyStrengthening of growth in the global economy

World output increased from 3.0% in 2002 to World output increased from 3.0% in 2002 to 3.9% in 2003. Africa’s growth rate in 2003 is 3.9% in 2003. Africa’s growth rate in 2003 is close to that of world output.close to that of world output.

Events in the global economy affect Africa Events in the global economy affect Africa because countries in the region depend on exports because countries in the region depend on exports for revenue as well as foreign exchange needed for revenue as well as foreign exchange needed for imports of intermediate and final goods used for imports of intermediate and final goods used by domestic firms and consumersby domestic firms and consumers

Increase in commodity prices, mostly in Increase in commodity prices, mostly in the second half of 2003. This has a positive the second half of 2003. This has a positive effect on growth because several countries effect on growth because several countries in the region depend on export of in the region depend on export of commoditiescommodities

HIPC debt relief has eased debt burdens in HIPC debt relief has eased debt burdens in recipient countries thereby boosting recipient countries thereby boosting growth.growth.

Domestic Factors

An improvement in the macroeconomic policy An improvement in the macroeconomic policy environment:environment:

Low current account deficitLow current account deficit Better fiscal managementBetter fiscal management Low inflationLow inflation

Relatively good weather condition, especially in Relatively good weather condition, especially in North AfricaNorth Africa

Reduction of political instability in several Reduction of political instability in several countries: Liberia, Angola, Democratic Republic countries: Liberia, Angola, Democratic Republic of Congo etc.of Congo etc.

Why has Recent Growth Performance Been Modest?

The negative contagious effect of continuing The negative contagious effect of continuing political instability in some countries in the political instability in some countries in the region: Cote d’Ivoire, Zimbabweregion: Cote d’Ivoire, Zimbabwe

Higher oil prices, which have negative effects on Higher oil prices, which have negative effects on growth in oil importing countries in the regiongrowth in oil importing countries in the region

Slow pace of recovery in the Euro Area, an Slow pace of recovery in the Euro Area, an important trading partner of several African important trading partner of several African countries.countries.

Relation to Millennium Development Goals

Recent improvements in economic performance Recent improvements in economic performance in Africa are insufficient to address the key in Africa are insufficient to address the key development challenge of the continentdevelopment challenge of the continent

There is the need to find ways to increase as There is the need to find ways to increase as well as ensure the sustainability of growth in the well as ensure the sustainability of growth in the regionregion

This is particularly important because, if current This is particularly important because, if current growth trends continue, several countries in the growth trends continue, several countries in the region cannot achieve the Millennium region cannot achieve the Millennium Development Goals (MDGs)Development Goals (MDGs)

…In 2003, only 4 countries achieved the growth target required to meet the MDGs

1999 2000 2001 2002 2003

Negative growth rate 0 1 5 5 7

Zero and positive rate 53 52 48 48 45

a) low (0-3.9%) 26 37 19 27 21

b)Medium (4%-7%) 23 14 24 16 20

c)High (>7%) 4 1 5 5 4

The Way Forward

Achieving sustained economic growth and Achieving sustained economic growth and poverty reduction remains the key poverty reduction remains the key challenge facing the African regionchallenge facing the African region

Confronting this challenge effectively Confronting this challenge effectively requires actions at the domestic as well as requires actions at the domestic as well as international level.international level.

Domestic Actions

Sustained macroeconomic stability as well as an Sustained macroeconomic stability as well as an improvement in the investment environmentimprovement in the investment environment

Reducing the incidence of conflicts Reducing the incidence of conflicts

Increasing the pace of regional integrationIncreasing the pace of regional integration

Dealing with the HIV/AIDS pandemicDealing with the HIV/AIDS pandemic

Instituting a credible commitment mechanism to Instituting a credible commitment mechanism to reduce the risk of policy reversals and reduce the risk of policy reversals and implementation failures. The African Peer implementation failures. The African Peer Review Mechanism can play a vital role hereReview Mechanism can play a vital role here

Paying more attention to the nature and quality Paying more attention to the nature and quality of growth to ensure that it is pro-poorof growth to ensure that it is pro-poor

Maximizing the gains from the PRSP process by, Maximizing the gains from the PRSP process by, for example, ensuring that funds released from for example, ensuring that funds released from HIPC debt relief are used for projects that have HIPC debt relief are used for projects that have significant impact on povertysignificant impact on poverty

International Actions

Finding more effective solutions to the debt issue. Finding more effective solutions to the debt issue. Improving the HIPC process will be a good startImproving the HIPC process will be a good start

Dealing effectively with the marginalization of Dealing effectively with the marginalization of Africa in the global economyAfrica in the global economy More market accessMore market access Reduction of OECD agricultural supportReduction of OECD agricultural support Enhanced Special and Differential Treatment Enhanced Special and Differential Treatment

ProvisionsProvisions More and better aid flowsMore and better aid flows

Enhanced mutual accountability between Enhanced mutual accountability between Africa and its development partnersAfrica and its development partners

Strengthening the PRSP processStrengthening the PRSP process More local ownershipMore local ownership More resourcesMore resources Paying attention to infrastructure Paying attention to infrastructure

provisionprovision