Transcript AFRICAN ECONOMIC OUTLOOK

Is African growth
sustainable?
Louis Kasekende
Chief Economist, AFDB
Outline of Presentation and Key
Messages
1.Highlights of Macroeconomic
Developments
Key Message: Economic Activity
continues on an Upward Trend
2.Is Growth Sustainable?
Key Message: A Cautious Yes – at
least in the short term. But growth
not high enough to attain MDGs ;other
emerging challenges
3. The role of AFDB and partners
1.Highlights of Macroeconomic
Developments
Introduction
 “Africa is ready for business” given its changed
landscape in recent years.
 With sustained macroeconomic and structural
reforms, economic fundamentals are catching up
with other parts of the world.
 Democracy is growing; conflicts have reduced
significantly.
 Pessimism on the continent is being replaced by
greater optimism - the 21st century will be the
“African century”.
GDP Growth 1998-2006
Some Positive Developments with
Sources of Growth
Progress towards Macroeconomic
Stability
External Conditions Favourable
Progress towards political stability
Africa
Net Oil exporters
(e)
1)
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Net Oil importers
Africa: Inflation
(Consum er Price Index, Percent) - 1998-2008
Africa’s Economic Growth Rate
continues on upward trend……
10.0
9.5
8.4
Percent
8.0
8.0
8.0
7.9
8.8
9.1
9.2
9.5
7.5
8.3
6.0
4.0
2.0
0.0
2008(p)
2007(p)
2006(e)
2005
Years
2004
2003
2002
2001
2000
1999
1998
Macroeconomic management is
improving: Inflation under control
amid moderate rise; emerging varying
challenges...
Percent
Africa: Fiscal Balance
(As % of GDP) - 1998-2008
2.4
-2.8
-2.5
-2.8
-4.1
2.7
3.2
2.0
0.1
-0.2
-1.9
2008(p)
2007(p)
2006(e)
2005
2004
2003
2002
2001
2000
1999
1998
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
Public finance
management is
generally good and
improving…….
Years
Percent
Africa: Trade Balance
(As % of GDP) - 1998-2008
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
4.3
1.2
1.6
-2.3
4.7
3.6
3.5
3.1
3.1
2.3
-1.2
2008(p)
2007(p)
2006(e)
2005
2004
2003
2002
2001
2000
1999
1998
Years
 External balances
are quite
stable……
2.Is Growth Sustainable?
Selected countries with real GDP growth above 5%; and
real GDP per capita above 2%
Rate of grow th GDP 2000-2006
Rate of growth GDP per capita 2000-2006
Ghana
Uganda
Mauritania
Rwanda
Rw anda
Egypt
Ethiopia
Burkina Faso
Nigeria
Uganda
Algeria
Cape Verde
Ethiopia
Burkina Faso
Namibia
Botsw ana
Nigeria
Tanzania
South Africa
Sudan
Tunisia
Mozambique
Sudan
Angola
Botswana
Chad
Sierra Leone
Chad
Equatorial Guinea
Equatorial Guinea
-
5.00
10.00
15.00
20.00
25.00
0.0
5.0
10.0
15.0
20.0
25.0
Frequency distribution
Africa : Real GDP Growth Rates
Africa : Real GDPper capita Growth
Rates
(Number of Countries)
(Number of Countries)
1990
2000
2005
2006 a/
16
9
1
1
0-3
9
16
12
3-5
13
12
Above 5
14
Negative
Not available
Total
1990
2000
2005
2006 a/
Negative
25
20
4
8
12
0-1.5
10
10
13
5
13
15
1.5 to 5
12
17
29
32
14
25
23
Above 2
14
17
31
34
1
2
2
2
Above 5
5
4
5
6
53
53
53
53
53
53
53
53
Total
 Fewer countries recording negative growth
 Increasing number growing at rates per capita above 2 % (34
Countries) and at real rate above 5% (23 Countries)
 Population growth remains high
….. African economies face major
development challenges and are still
vulnerable……
 Meeting the MDGs – a major challenge for most African countries
 Only 12% satisfactory rate towards reducing extreme poverty
by half
 Global imbalances
 Commodity prices volatility (increased oil prices, decreasing
cotton prices…)
 Exchange rate uncertainties: $ depreciation, euro appreciation,
 Trade challenges: difficulties in reaching agreements on the
Doha Round; developing Africa’s capacity to trade; new
competitors
 Domestic sources of instability
 Limited diversification
 Unfinished reforms agenda
 Natural Hazards – drought; locust invasion
…….Further Reforms and Policy
Actions Needed…….
Maintain stable macroeconomic framework
Redefine sources of Growth
Prudent use of windfall gains is essential
Increase momentum of structural reforms and
improve investment climate
 Regional cooperation and integration efforts need
to be strengthened
 More efficient use of resources for human capital
development
 More coordination between Development partners




3. The Role of the AfDB and
Partners
Background
 Africa’s premier financial institution, est. in 1964/AAA Rating
 Third largest source of multilateral assistance to Africa
Africa - Ne t ODA from M ultilate ral Donors - Te n
Large s t Donors , 1997-2004
(As % of Ne t Total to Africa)
IDA
38.0
34.0
EC
Af DF
8.0
UNHCR
3.4
UNDP
3.3
WFP
3.2
UNICEF
3.0
unta
2.3
Other UN
2.0
UNFPA
1.0
Total
Multiilateral
ODA to Africa
US $ 52.1
Billions
 Strategic Orientation of the Bank
 Lending operations continue to focus on poverty
reduction and sustainable economic growth, but with a
sharper focus on
 Infrastructure
 Regional integration
 Private sector
 Governance
 In 2006, overall Bank Group approvals for loans,
grants, guarantees, equity investments and debt relief
amounted to US$3.9 billion
 Fragile states: the Bank is taking a lead in engaging
with fragile states
 The Bank is one of the prime movers in ensuring that
key policy contours of NEPAD are clearly defined and
implemented
 The Short-Term Action Plan (STAP) provides the
primary basis for the Bank’s intervention in regional
infrastructure.
 STAP is complemented with capacity building
projects, infrastructure services and development and
facilitation programs with investment projects worth
more than US$8 billion.
 For the medium to long term, the Bank is defining the
NEPAD Infrastructure Medium to Long Term Strategic
Framework (MLTSF).
 To fast track regional infrastructure project preparation a
multi-donor Project Preparation facility( i.e. NEPAD
IPPF). Has been established.
 By the end of 2006, funding of approximately USD 3.7
million has been approved for the preparation of eight
physical projects.
Conclusion
 Africa doing better – due to favorable external
environment but, as importantly, due to internal
factors
 Prospects for sustained improvement are good
 African countries need to deepen reforms and
carry out remaining structural reforms;
 Africa’s development partners should maintain
support in line with commitments