Survey of Economic and Social Conditions in Africa 2004-2005 For presentation at the Conference of African Ministers of Finance, Planning and Economic.

Survey of Economic and Survey of Economic and

Social Conditions in Social Conditions in

Africa 2004-2005Africa 2004-2005 For presentation at the Conference of For presentation at the Conference of

African Ministers of Finance, Planning and African Ministers of Finance, Planning and Economic Development,Economic Development,

11-13 May 2005, Abuja, Nigeria11-13 May 2005, Abuja, Nigeria by by Prof. Augustin FosuProf. Augustin Fosu

Director, Economic and Social Policy Director, Economic and Social Policy Division, ECADivision, ECA

OutlineOutline Recent Economic performance

Growth performance by subregionsFastest & slowest performers Implications for the MDGs

Sources of growth Internal External

Some areas of concern Medium-term prospects Trends in poverty Progress towards the MDGs targets Policy interventions

African economic performance African economic performance improvesimproves

2.8

4.8 4.8

3.5

3.9

4.5

3.2

4.34.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

North Africa SSA AFRICA

2002 2003 2004

Underlying factors for improved Underlying factors for improved performance in 2004performance in 2004

High international oil prices coupled with high oil production benefited most African oil exporters

Strong global recovery increased the demand for oil and most non-oil commodities

Better performance in agriculture across the continent though locust invasion adversely affected this sector in Mauritania, Mali, Niger and Senegal

Continued sound macroeconomic management Improved political situation in many countries Increased donor support in the form of aid and

debt relief Rising FDI, expansion in the industrial sector

and growth in the tourism sector

Better performance in 3 of the 5 Better performance in 3 of the 5 sub-regionssub-regions

Central Africa led subregional performance in 2004, followed by East Africa, North Africa, West Africa and, then, Southern Africa

2.5

3.5

6.7

4.3

4.34.6

4.8

4.8

2.5

5.8

4.0

7.3

0.0 2.0 4.0 6.0 8.0

Southern Africa

West Africa

AFRICA

North Africa

East Africa

Central Africa

2004

2003

Rising oil prices for North and Central Africa

Increased agricultural production, coupled with rising commodity prices for East and West Africa

Strong global and domestic demand for South Africa, partly due to its low interest rate, benefited Southern African sub region

Sub regional performance Sub regional performance explained by…explained by…

Fastest and slowest performers in Fastest and slowest performers in AfricaAfrica

The fastest growing African countries in 2004 were Chad, Equatorial Guinea, Liberia, Ethiopia, Angola and MozambiqueChad, Equatorial Guinea & Angola – oilEthiopia – recovery in agricultural

sectorLiberia

post-conflict economy substantial external aid in support of its rebuilding efforts

Cont’d

The slowest growing economies in Africa were Zimbabwe, Seychelles, Cote d’Ivoire, Central African Republic and GabonZimbabwe - performance was hampered by

drought and an adverse political environment

Cote d’Ivoire - continuing political turmoil

Gabon -despite the discovery of new oil fields & higher oil prices, a decline in oil production due to limited investments in upgrading existing fields

Fastest and slowest performers… Fastest and slowest performers… Cont’dCont’d

Real GDP growth rates, top 10 & Real GDP growth rates, top 10 & bottom 5 African countries, bottom 5 African countries,

2004 (%)2004 (%)

-6.8

-2.0

0.9

1.4

1.7

4.6

6.6

6.6

6.8

6.9

8.3

11.5

11.6

15.0

18.3

39.4

-10.0 0.0 10.0 20.0 30.0 40.0 50.0

Zimbabwe

Seychelles

Cote d'Ivoire

CAR

Gabon

AFRICA

Gambia

Sierra Leone

Sudan

Congo DR

Mozambique

Angola

Ethiopia

Liberia

Equatorial Guinea

Chad

Achieving growth required to meet the MDGs remains a challenge for Africa

For instance, based on the recent 2000-2004 period, only four countries achieved the estimated 7% average annual growth rate required to meet MDG1: Equatorial Guinea, Chad, Mozambique, & Angola

However, 14 African countries have achieved an average annual growth rate of 5% or higher since 2000 Equatorial Guinea, Chad, Mozambique, Angola,

Sudan, Ethiopia, Rwanda, Liberia, Uganda, Burkina Faso, Mauritius, Senegal, Tanzania, & Botswana

Improved income distribution helps

Growth and MDGsGrowth and MDGs

Considerable gains by oil Considerable gains by oil exportersexporters

3.1 3.3

5.4

2.9

5.3

3.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2002 2003 2004

O il producers Non-oil producers

Internal Sources of GrowthInternal Sources of Growth

Macroeconomic stability

Inflation declined

Fiscal deficits eased

Current account improved

Tourism on the rise

Good weather prevailed

External Sources of GrowthExternal Sources of Growth

Strong global economic recovery

Rising export prices & volumes of most African

commodities

ODA on the rise

FDI flows are up

ODA hit a new peak of US$26.3 ODA hit a new peak of US$26.3 Billion in 2003Billion in 2003

13.4

All donors

26.3

15.716.116.7

21.3

23.3

24.825.3

16.5

19.2

DAC donors

10.4 10.211.211.4

13.4

9.5

11.5

13.5

15.5

17.5

19.5

21.5

23.5

25.5

27.5

FDI inflows to Africa …FDI inflows to Africa …reboundingrebounding

Due to High prices of most key commodities Enhanced investor perceptions

•But concentrated in natural resource sectors

19.6

11.8

15.0

20.0

0

2

4

6

8

10

12

14

16

18

20

2001 2002 2003 2004

Some areas of concernSome areas of concern

Risk of currency appreciation

Low domestic savings

Weak domestic investment

Growth has so far not been

translated into employment

creation or poverty reduction

Medium-term outlook is Medium-term outlook is positivepositive

Africa is projected to grow at 5% in 2005—highest in a decade

3.5

4.4 4.34.5 4.6

5.04.8

5.2

5.85.6

7.3

6.1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Southern Africa West Africa AFRICA North Africa East Africa Central Africa

2004 2005

Upside factorsImproved agricultural production,

assuming continued good weather conditions

Continued macroeconomic stability

Vibrant growth in the tourism and mining sub-sectors

Continuing strong oil sector ODA, FDI and remittances are

expected to increaseContinuing improving political

stability in many African countries

Downside risksGlobal growth is expected to

slow down (mainly b/c of high oil prices)

High oil prices adversely affect oil importers by pushing up inflation

Continuing political tension (instability) in Cote d’Ivoire, Zimbabwe & Sudan

Has Africa’s growth translated Has Africa’s growth translated into unemployment or poverty into unemployment or poverty

reduction?reduction? As employment is a source of income

for the poor, increasing employment

opportunities is a critical element of

poverty reduction initiatives

However, Africa’s growth has so far

not been translated to employment

creation or poverty reduction

Trends in povertySSA had the highest poverty rate in

2003With the exception of SSA, the

poverty rate decreased substantially between 1980 & 2003 for all regions

SSA was the only region where the proportion of the “working poor” increased during 1980-2003

Therefore, GDP growth in SSA has been barely enough to absorb population growth

Progress towards the MDGs Progress towards the MDGs targetstargets

• Unsatisfactory performance of SSA in creating jobs and reducing poverty puts doubts on achieving the overall targets of the MDGs

• In fact, SSA’s overall performance (during 1990-2000) w.r.t. achieving the MDG targets has been disappointing (details later in the Issues Paper)

Policy InterventionsPolicy Interventions

To achieve high & sustainable growth and proper distribution in Africa, policy interventions will be required at different levels:economicsocialpolitical

At the economic level, priority must be given to minimizing dependency on the vagaries

of the climate reducing exposure to commodity price

shocks via export diversification consolidating macroeconomic stability mobilizing domestic savings to finance

investmentsmaximizing job creation by minimizing

constraints to private sector investments and growth

minimizing the unpredictability of ODA flows

accelerating efforts at regional cooperation

At social level, interventions must be guided by maximizing physical and financial access to health

systems by the poor addressing the adverse effects of major diseases investing in education & training addressing reproductive health & other gender-related

issues On the political front, the overriding objectives should be

securing peace and security improving governance making special provisions for the least-developed

countries and post-conflict economies optimizing global partnerships

Thank Thank you!you!