Statistics Commission for Africa Meeting December 10-12 2014, Tunis, Tunisia International Comparison Program for Africa (ICP-Africa) Highlights of the.

Statistics Commission for Africa MeetingDecember 10-12 2014, Tunis, Tunisia

International Comparison Program for Africa (ICP-Africa)

Highlights of the results of the ICP-Africa 2011 round

“Comparing the Real Size of African Economies”

Outline

2

I. Introduction

II. Overview of the ICP 2011 round

III. Some highlights of the results

IV. Africa in the World – Overview

V. Dissemination of results

VI. Potential uses of ICP data

VII. Main Lessons Learnt and Recommendatons

VIII.The Way Forward

Introduction 1/4

3

• Each country estimates its GDP and component expenditures at national price levels and in national currencies.

• In order to make sound comparison of economic & social data - they need to be valued at a common price level and expressed in a common currency.

• Countries must use an approach which removes the distortion caused by using exchange rates. Giving rise to;

• The ICP - uses “Purchasing Power Parities” (PPPs) to effect this double conversion: expressed in a common currency & valued at a common price level

Introduction Size of African Economies unadjusted for currency & price levels  2/4

South Africa

Nigeria

EgyptAlgeria

Angola

GDP in constant prices for top five countries2005-2011

2005060708091011

Bill

ions

($

)

Introduction Size of African Economies unadjusted for currency and price levels  3/4

GDP in constant prices for bottom five countries2005-2011

2005060708091011

Bill

ions

($

)

Seychelles

Comoros

Sao Tome & Principe

GambiaGuinea-Bissau

Introduction 4/4

6

Why ICP?

• To produce internationally comparable price levels, economic aggregates in real terms and Purchasing Power Parity estimates

• Simply put - to compare the GDPs of different countries with a view to determining their relative size, productivity and material well-being.

What is a PPP?

• PPP allows one to estimate what the exchange rate between two currencies would have to be in order for the exchange to be on par with the purchasing power of the two countries' currencies.

• As an example between two countries - is an exchange rate at which the currency of one country needs to be converted into that of the second country in order to purchase the same volume of goods and services in both countries

• Formally, PPPs are expenditure-weighted averages of relative prices of a vast number of goods and services on which people spend their incomes.

Overview of the ICP 2011 Number of participating countries 1/3

7

1970 1973 1975 1980 1985 1993 2005 20110

20

40

60

80

100

120

140

160

180

200

9 1531

45 42

95 99

145

11

3

15 22

22

48

50

Africa

Total Ex Africa

No increase in African Country Participation between 1985 and 1993

More than 100% increase in number of African Country Participation between 1993 and 2005

Overview of the 2011 ICP - Participating countries in

Africa 2/3

Non participating countries

50participating countries

26%of ICP participating

countries

9

Overview of the 2011 ICP Regional coordination and Activities 3/3

The AfDB provided the overall management and coordination of the 2011 International Comparison Program (ICP) in Africa

Activities were conducted in close collaboration with participating countries and sub-regional Organizations, AFRISTAT, COMESA, ECOWAS and SADC

Information (Data/ Metadata)

Participation Price DataImportance Indicator

Survey Framework

Questionnaire

Country Report

Number of Countries

50 50 50 48 42

Information (Data/ Metadata)

Participation HousingHousing Quantity

Private Education

Compensation of Government

Employees

Machinery and

EquipmentConstruction

Number of countries

50 48 48 49 47 50 46

10

Highlights of Results

Nominal GDP Country Shares ( Africa = 100%) 1/18With 48 participating Countries (excluding Algeria & Seychelles)

2005

060708091011

South Africa29%

Nigeria14%

Egypt12%

Morocco7%

Angola4%

Other Coun-tries

34%

2005

South Africa24%

Nigeria15%

Egypt14%

Angola6%

Morocco6%

Other coun-tries35%

2011

Nominal GDP Country Shares ( Africa = 100%) 2/18With 50 participating countries (including Algeria & Seychelles)

South Africa21%

Nigeria13%

Egypt12%

Algeria11%Angola

6%

Morocco5%

Other Coun-tries

32%

2011

Real GDP Country Shares ( Africa = 100%) 3/18With 48 participating Countries (excluding Algeria & Seychelles)

South Africa

21.5%

Egypt20.2%

Nigeria13.3%

Morocco5.8%

Sudan4.3%

Other Countries35.0%

2005

Egypt22.9%

South Africa

16.9%Nigeria14.1%

Morocco6.0%

Sudan4.2%

Other Countries35.9%

2011

2005

060708091011

Egypt20.2%

South Africa

14.9%

Nigeria12.4%Algeria

11.8%Morocco5.3%

Other Countries35.4%

Real GDP Country Shares ( Africa = 100%) 4/18(With 50 participating Countries (including Algeria & Seychelles)

South Africa(2)

Egypt(1)

Algeria(4)

Nigeria(3)

The four giants

Countries by real GDP

South African rand (million)

5/18

New Scenario: GDP Country Shares ( Africa = 100%) 6/18Using Nigeria new revised figures for 2013

2005 2011

Nigeria20.4%

South Africa

19.7%

Egypt11.3%

Algeria9.7%

Angola5.1%

Morocco4.9%

Other Coun-tries

28.9%

Nominal GDP Country Shares

Nige-ria

19.3%

Egypt18.6%

South Africa13.7%Algeria

10.9%

Mo-rocco4.9%

Sudan3.4%

Other Coun-tries

29.2%

Real GDP Country Shares

3South Africa

13.7%

2Egypt18.6%

4Algeria9.7%

1 Nigeria19.3%

New scenario of four giants

in 2013Real GDP

7/18

18

18

Africa13%

GDP Share 4.5 %

Africa’s share to World in 2011 8/18

Africa4.5 4%

PopulationShare 14%

High and Low income countries and their distribution 9/18

Four small countries have the Highest Per capita GDP

• Equatorial Guinea• Seychelles• Gabon• Mauritius

The Bottom of the ranking• Liberia• Comoros• Congo, Democratic

Republic• Burundi

Per Capita investment in 2011

Investment: Gross Fixed Capital Formation per capita (ZAR) 10/18

Low in • Liberia• Comoros• Burundi,• Central African Republic

High in• Equatorial Guinea• Seychelles• Botswana• Mauritius

Low savings

Low investment

Poverty

Income and Investment 11/18

21

Correlation between per capita Gross Domestic Product and per capita Gross Fixed Capital Formation

0 20,000 40,000 60,000 80,000 100,000 120,0000

5,000

10,000

15,000

20,000

25,000

30,000

Algeria

Botswana

Egypt

Gabon

Nigeria

Seychelles

South Africa

f(x) = 0.232785849800856 x − 434.610214237688R² = 0.874833572584308

Per capita Gross Domestic Product

Pe

r ca

pita

Gro

ss C

ap

ital F

orm

atio

n

2011 Price Level Index For GDP By

Country, Africa Average = 1.0

Africa average =

1

Most expensive Countries 12/18(Price Level Index)

Mauritius

Congo, DRC

Comoros

Congo

Cabo Verde

Equatorial Guinea

Namibia

South Africa

Gabon

Angola

1.22

1.24

1.29

1.35

1.36

1.37

1.41

1.44

1.48

1.60

2011 Price Level Index For GDP By

Country, Africa Average = 1.0

Less expensive countries 13/18(Price Level Index)

Egypt

Ethiopia

Uganda

Madagascar

Tanzania

Burundi

Gambia, The

Sierra Leone

Guinea

Kenya

0.61

0.64

0.72

0.73

0.73

0.74

0.74

0.79

0.83

0.85

The cost of living across

AfricaAfrica average = 100

Most expensive countries

Least expensive countries

Less expensive

More expensiveAverage

14/18

Most expensive

Least expensive

Less expensive

More expensiveAverage

15/18

The price of bread & cereals

across AfricaAfrica average = 1

Most expensive

Least expensive

Less expensive

More expensiveAverage

Bread & cereals includes rice, other cereals & flour, bread, other bakery

products, and pasta products

16/18

Household welfare 17/18

Per capita Actual Individual Consumption (Africa = 100)

10 highest countries

Swaziland

Namibia

Gabon

Algeria

Botswana

Tunisia

South Africa

Egypt

Mauritius

Seychelles

209

209

214

236

244

262

297

301

426

476

Household welfare 18/18

28

2011 Per capita Actual Individual Consumption (Africa = 100)

10 lowest countries

Congo, DRC

Liberia

Comoros

Burundi

Niger

Guinea

Central Afr. Rep.

Mozambique

Guinea Bissau

Burkina Faso

16

22

22

23

26

28

31

32

33

34

29

Africa in the World - Overview

Africa in the World – Overview 1/2

30

Regional Average Expenditures per capita, PPP-based (Percent of World Average, World = 100)

Africa Asia CIS Eurostat/OECD

Latin America Caribbean Western Asia

Gross Domestic Product

0.266340755582946

1.09468673013029

0.575767345734677

1.60167433753363

0.515325501543603

1.1846972828144

2.0534473689685

Actual Individual Consump-tion

0.269063960772144

0.78946509887352

0.737986004936384

1.8249945368966

0.660905773866777

1.35551141015678

1.16037437468996

Collective Govern-ment

0.348945650837056

0.897207333653905

0.542559599854733

1.47874286359092

0.40101084236359

1.73871035702444

1.75878166454666

Gross Fixed Cap-ital For-mation

0.294080521682243

1.00980980752263

0.332710773881104

1.4513049620423

0.420912134369918

1.34273832482462

2.64380005779088

25%

75%

125%

175%

225%

275%

Wor

ld A

vera

ge =

100

%

Africa in the World – Overview 2/2

31

Regional Average Price Level Index(Percent of World Average, World = 100)

Africa Asia CIS Eurostat-OECD Latin America Caribbean Western Asia0

20

40

60

80

100

120

140

160

180

GDP

ACTUAL FINAL CONSUMPTION

COLLECTIVE CONSUMPTION EXPENDITURE BY GOVERNMENT

GROSS FIXED CAPITAL FORMATION

32

Dissemination of Results 1/1 Reports :

Comparing the Real Size of African Economies – Highlights of the Main Findings of the 2011 Round of the International Comparison Program in Africa (English and French)

  Comparing the Real Size of African Economies –Results of the 2011

International Comparison Program for Africa (English)

Results of the 2011 ICP-Africa have been presented to:

NSOs’ Director Generals at the ASSD in February 2014 in Gaborone  

Bank Economists and Senior Management early November 2013  

Bank Governors and Board of Directors at the Bank Annual Meeting in Kigali in May 2014

33

Potential Uses of ICP Results

Some examples on the uses of ICP 1/3 data

34

ICP can used to compare your country with other countries in Africa & other countries around the world

• Wealth – GDP (PPP) / population

• Prosperity – HH consumption (PPP) / population

• Poverty – Less than US$ 1.25 (PPP) / day

• Productivity – GDP (PPP) / employed

• Household spending – HH consumption (PPP) / GDP (PPP)

• Expenditure of education – Household + government expenditure on education

(PPP)/ GDP (PPP)

• Food consumption - Expenditure on Food and Non-alcoholic Beverages (PPP)

/population

• Cost of living – PLI for Actual Household Consumption

• Construction prices – PLI for Construction

• Health costs – PLI for Health expenditures

• ETC.

Potential Uses of ICP data 2/3

35

• UN 1993 System of National Accounts recommends use of PPPs for cross country comparison of GDP & related

• Comparing welfare & living standards (poverty analysis) US$1.25 poverty lines Poverty Analysis

• Harmonizing economic policies for convergence & regional integration

• Fostering intra African trade

• Comparative advantage analysis & investment / employment policy decisions to improve competitiveness & business environment

• Academia and research groups

Country level

Potential Uses of ICP data 3/3

36

• Establishing international poverty threshold (World Bank)

• Constructing the Human Development Index (UNDP)

• Comparing per capita health expenditures (WHO)

• Assessing per capita education expenditures (UNESCO)

• Monitoring the welfare of children (UNICEF)

• Comparing the relative sizes of economies (AfDB, IMF)

• Estimating weighted averages of regional growth rates (AfDB, IMF)

• Academia and research groups

International level

Main Lessons Learnt and Recommendations 1/1

37

Integrating the ICP and CPI data collection of the main household consumption items created synergy and reduced cost

Bringing all stakeholders to work together on some activities had a leverage effect on both AfDB and participating countries

Weak participation of STCs. AfDB to spearhead a process to introduce ICP methodology into their curricula and by encouraging them to conduct some research on ICP issues related to Africa

Countries have yet to comply with the December 2007 Accra Declaration of Heads of NSOs, which recommended the integration of ICP-Africa activities into the usual NSOs activities

The Way Forward 1/2

38

Undertaking a reduced ICP-Africa in 2015

Reduce price data collection for the main HH consumption survey but full GDP coverage

Presentation and discussion on the reduced list of product

Preparatory activities with countries

Launching workshop in Feb 2014

Quarterly price data collection starting in March 2014

39

Integration of ICP-CPI Activities

Working in collaboration with the SROs the AfDB is expected to promote the establishment of a legal and regulatory framework for a better integration between the (H)CPI and ICP in the RMCs.

Assessment of the CPI or HCPI systems in each and every country

Establish a regional technical committee

Select a group of 7 countries to pilot the integration of (H)CPI – ICP

Develop specific training modules for STC as part of AfDB capacity building support to countries in the areas of  (H)CPI and ICP

The Way Forward 2/2

40

Thank You