Addressing Key Structural Vulnerabilities for [Africa’s] LDCs UN-OHRLLS Brainstorming Meeting on Substantive Preparation for UNLDC-IV New York, NY 14-16 July 2010
Jan 06, 2016
Addressing Key Structural Vulnerabilities for [Africa’s] LDCsUN-OHRLLS Brainstorming Meeting on Substantive Preparation for UNLDC-IVNew York, NY 14-16 July 2010
Brief Outline
•Context: Africa’s macroeconomic fundamentals in recent past
•Key structural vulnerabilities specific to [African] LDCs and actions required:▫to increase resilience to shocks; and▫for structural transformation
•Concluding thoughts
Underlying risks, but great potential• Speed and the magnitude of
the global recovery;• Amount and timeliness of
foreign aid;• EU turmoil may increase risk
of recovery; may induce W-shaped recovery;
• Delayed recovery could derail economic fundamentals due to lack of finances;
• Setback on institutional reforms could delay technology adoption▫ Nonetheless, the 53 countries
offer a variety of business environments: with different investment grade ratings
5.2
4.5
4.34.2
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2006 2007 2008 2009 (e) 2010 (f) 2011 (f)
AfricaWorldsub-Saharan Africa
Africa’s Strong Performance in 2001-08• At about 6% annual growth,
Africa among the fastest growing regions in 2001-08; rel. low inflation
• Broad-based growth – 40% of countries grew at 5% or above;
• Continent becoming more integrated into the global economy:▫ Trade openness increased for
all countries – from 62% of GDP in 2001 to 79% in 2008;
• Drivers:▫ Policy and structural reforms
Stable macroeconomic conditions;
▫ Favorable external environment; commodity boom;
▫ Increased FDI flows; remittances; debt relief; non-traditional partners;
• ….. but Africa’s growth more subdued in terms of GDP/cap.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Adv
ance
dec
onom
ies
W
este
rnHe
mis
pher
e
Ce
ntra
l and
East
ern
Euro
pe
M
iddl
e Ea
st
A
frica
CIS
and
Mon
golia
De
velo
ping
Asia
aver
age
annu
al c
hang
e in
per
cent
World average
Many African Economies Still Rather Fragile
• Continent remains highly vulnerable to external shocks (dependence on commodities; little value addition; undiversified trade partners, etc); Africa can increase resilience through:i. implementing structural reforms to diversify
their economies, including development of the manufacturing sector;
ii. increasing flexibility of macroeconomic frameworks while maintaining macroeconomic stability;
iii. building social safety nets to raise social and political stability; and
iv. deepening regional integration. • These measures are also key for making African
economies more attractive to foreign investors.
VULNERABILITY 1
Generally non-Competitive Economies
VULNERABILITY 2
6
The Global Competitiveness Index The Framework
Key for
efficiency-driven economies
Key for
factor-driven economies
1. Institutions
2. Infrastructure
3. Macroeconomic stability
4. Health and primary education
5. Higher education and training
6. Goods market efficiency
7. Labor market efficiency
8. Financial market sophistication
9. Technological Readiness
10. Market size
11. Business sophistication
12. Innovation
Key for
innovation-driven economies
BASIC REQUIREMENTS
EFFICIENCY ENHANCERS
INNOVATION & SOPHISTICATIONS FACTORS
Underdeveloped Manufacturing/Industrial Sector
VULNERABILITY 3
0
2
4
6
8
10
12
14
16
18
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
pe
rce
nt
of
GD
P
Oil exporters
Oil importers
AFRICA
Sub-Saharan Africa
Share of Manufacturing in Output, 1998 - 2008
Comparatively Low Saving Rates
VULNERABILITY 4
0
10
20
30
40
50
60
CEE AdvancedEconomies
Lat. Am.,Carribeans
Africa CIS Middle East DevelopingAsia
perc
ent o
f GDP
2005 - 2008 (average)
2009 - 2010 (average)
Emerging and developing countries average 2005- 2008Emerging and developing countries average 2009- 2010
0
5
10
15
20
25
30
35
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Post Conflict Countries
AFRICA
Sub-Saharan Africa
Fragile States
Africa’s under-developed human resources
VULNERABILITY 5
5.04.54.03.53.0
10
8
6
4
2
0
Log of GDP per capita (2008, PPP, current $)
Educa
tion Index
AfricaOther EMEs and LDCsAdvanced economies
Education and Human Resources: Africa and other coutnries, 2009
Generally underdeveloped infrastructure
•Infrastructure critical to growth, but continent held back by limited stocks and high costs.
VULNERABILITY 6
Images from Google
General absence of regional integration• In general, efforts at regional
integration on the continent have not gone far enough to▫ remove barriers to free trade in
the region;
▫ increasing the free movement of people, labor, goods, and capital across national borders,
▫ reduce the possibility of regional armed conflict, and
▫ adopt cohesive regional stances on policy issues, such as the environment, climate change and migration, trade, FDI, relationship with donor community, etc.
VULNERABILITY 7
Key Policy actions required for Africa’s LDCs:
1. Continue macroeconomic policies aimed at improving general resilience in the economies;
2. Prioritize improvements in general competitiveness of the economies;
3. Develop the productive capacities, particularly in the manufacturing sector, based on latest thinking on the subject;
4. Redouble efforts to boost saving rates; 5. Scale up investments infrastructure;6. Support efforts at greater regional integration.
Concluding thoughts
• In general,▫Diversification and structural reforms (private sector
development, financial sectors, labor markets) as well as deepening regional integration remain key development priorities for Africa’s LDCs.
▫Pay-off to domestic policy reform in Africa would be even greater if supplemented by measures taken by developed countries (including adequate and timely development assistance; successful completion of Doha Round).
▫The African voice is still not adequately heard in the debate on global financial governance framework—something that ought to change.
▫As a major partner of choice for Africa’s development financing; the AfDB is an important voice in the debate on the continent’s development challenges.