Transcript Prospects for Sustainable and Inclusive Growth in Africa - CU

Central Bank of Nigeria
PROSPECTS FOR
SUSTAINABLE AND
INCLUSIVE GROWTH IN
AFRICA
S A R A H O. A L A D E , PhD
AC T I N G GOV E R N O R
CENTRAL BANK OF NIGERIA
Presented at the 1st Covenant University International Conference on African Development Issues.
May 5, 2014
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Outline

Introduction

Inclusive Growth

Ensuring Inclusiveness

Drivers of Inclusive Growth

Lessons from Emerging regions

Concluding Remarks
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Introduction
• Since the turn of the
century, perception on
Africa’s economic growth
has changed from a
hopeless continent to the
next growth frontier
• In real term, the continent
grew on average by 4.9%
between 2000 and 2008
• At 4.6% in 2010, growth
was substantial in spite of
the global crisis
• It, however, slowed down
from 5.7% in 2012 to 4.0%
in 2013 and forecasted to
increase to 4.7% in 2014
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Introduction …
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Growth was principally driven by:
• Relatively high commodity prices
•
Rising trade & investment ties with emerging
economies
•
•
Increased domestic demand
•
Improved economic management, which has
resulted in macroeconomic stability
Enlarged middle class projected at 34% of the
population
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Introduction …
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Fig 2: Africa’s Inflation Rate (%)
North Africa
West Africa
Central Africa
East Africa
Southern Africa
Africa
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14
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• Mainly due to:
• Subdued demand
• Moderating international
food and fuel prices;
and
• Tighter monetary policy
in most countries
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• Inflation decelerated from
an average of 8.2% in 2012
to 8.0% in 2013; and
forecast to fall further to 7.8
per cent in 2014
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6
4
2
0
2010
2011
2012
2013
Source: Adapted from UNECA-ERA 2014
2014f
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Introduction …
• In 2013, most African countries witnessed real
exchange rate appreciation
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• Influenced by tight monetary policy to control inflation
• Fiscal deficit as percentage of GDP stood at 1.9% in
2013 compared with 1.5% in 2012 and projected to
rise to 3.1% in 2014
• Current account deficit stood at 1.8% of GDP in
2013 and expected to decelerate to 1.7% in 2014
• Due to improved macroeconomic management in most
countries
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Introduction …
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 International reserves in US dollar term
increase by 3.5% in 2013 and stood at 28.1% of
GDP compared with 28.3% in 2012
 External debt as share of GDP was 24.0% vis-àvis the 25.0% threshold.
• Despite Africa’s impressive economic
performance, the growth has been noninclusive, owing to
• inability to create jobs,
• improve overall wellbeing of the people, and
• reduce income inequality gap
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Introduction …
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• Though, global poverty
rate in all regions
continues to fall
… Africa’s still highest
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Introduction …
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• Similarly, unemployment is
highest in the African
region vis-à-vis comparable
regions
Source: ILO, Trends Econometric Models, October 2013
• There is need to reverse the
prevalent jobless growth
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Inclusiveness In Growth:
Why Is It Important?
 Sine qua non for better living conditions
 particularly in emerging and developing countries
 Engenders pro-poor and distributive growth
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 reduces poverty and inequality → empowerment
 Enhances social welfare evenhandedly
 benefits all strata of the society including the poor, nearpoor, middle-class, as well as the rich
 A “no-loss” welfare outcome
 benefits the disadvantaged at no cost to the well-offs
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… why inclusiveness?
 It is characterised by equity, empowerment,
expanded opportunities, increased
participation, wide-ranging satisfaction
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 enables agents to contribute to and benefit from the growth
process → diminishes social alienation and polarisation
 It dismantles constraints and institutes levelplaying field for investment
 It supports entrepreneurialism and creativity
 It involves not only wage-employment but promotes selfemployment
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Non-inclusiveness: Some
Implications
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 Retards social mobility, heightens polarisation
in education and healthcare, exclusion in
the labour market
 Debilitates social cohesion and unity, nurtures
discontent and rile, and undermines
confidence in social policies
 Alienates disadvantaged individual and
vulnerable social groups from economic life
 denies the society optimal use of its human capital
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Inclusive Growth: How?
 Through benign policies in human capital
(education ad health), innovation and regulation
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 Increased access to good jobs and education,
health services and a healthy environment, and
well-functioning institutions
 In Africa, access to basic social services largely remains a
challenge
 Focus on productive growth rather than merely on
employment growth
 Emphasis on increased productivity
 Conducive environment for entrepreneurship and
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investment to thrive
Why Inclusive Policies Will
Outperform Non-inclusive Ones?
 It is able to juxtapose growth in income vs.
living standards
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 Taking cognizance of non-income aspects of well-being
 It circumvents the equity-growth trade-off
identified in the literature
 Synergizes pro-inclusiveness and pro-growth
policies
 Employs pro-inclusiveness devices to propel growth
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Drivers of Inclusive Growth
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 Productive employment
 Increased broad-based opportunity for
investment
 Increased access to social services
 Financial inclusion
 Access to financial services by the socially and economically
disadvantaged group
 Increased consumer credit
 Fiscal inclusion
 Revenue → tackling tax avoidance and evasion
 Expenditure → provision of public goods → de-emphasizes
social benefits → subsidies (partial or total) not the best form of
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fiscal inclusion
Ensuring Inclusiveness
The Role of the Financial Sector
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• Regulation to ensure competiveness in the
financial sector
• to ease access to finance by SMEs and informal
sector
• Financial deepening
• Interventionist policies of central banks/
government should focus on promoting
development of the economy
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Ensuring Inclusiveness …
• Improved payment systems is a precursor for
the promotion of financial inclusion
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• Encourages private participation
• Mobile banking results in financial inclusion and
promotes financial stability
• Promote investor confidence to enthrone the
private sector as the engine of growth
• Investment-friendly and transparent
macroeconomic environment
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Ensuring Inclusiveness …
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The Role of Government
• Adopt and implement coherent
development plans
• Develop and improve human capital
•
•
Providing quality health and education
Effort at empowering youth and women
• Address infrastructure constraints and
bottlenecks
•
Roads and transport, power and electricity,
water,
• Providing incentives for innovation
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Ensuring Inclusiveness …
The Role of Government …
• Promote structural transformation
(diversification, industrialization and
competitiveness)
• Focus on employment by creating better
conditions for the private sector to drive
growth
• Build capable and accountable states and
regional institutions that invest in human
development
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Ensuring Inclusiveness …
The Role of Government …
• Safety nets
• Improving market access through promoting
regional trade
• Reforms that fast-tracks technological
change and innovation focused on green
growth engenders:
•
•
•
•
Investment in skills
Education
Poverty reduction
Employment opportunities
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Ensuring Inclusiveness …
The Role of Government …
• Laws and regulations, customs and social norms
• weak enforcement of contracts and laws
• property rights
• corrupt and inefficient bureaucracies
• societal norms that discourage cooperation
• Political institutions
• political stability and democratic system
• Economic and social infrastructure
• Privatisation – private sector participation
• Trade liberalization - partial liberalization of the
financial account
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Ensuring Inclusiveness …
The Role of the Private Sector
• Encouraging value-chain development
• skills development and upgrading
• Increase local content
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• strengthening linkages with local suppliers
• Adoption
and
adaptation
of
technologies and access to capital
appropriate
• Improved value addition
• Research and development to cover job creation
at all levels of skills
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Lessons From Emerging
Regions
China – world’s fastest growing economy
• Though inequality is still high but it is coming down
• Absolute poverty is also falling given the general rise in mean
income
• Significant progress in education and social outcomes
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Mexico – on the right track inclusively
• Reducing income disparity amidst yet high inequality.
• Ratio between the richest and poorest 10% is 27:1
• Improved outcomes in education and access to public goods
Brazil – embracing inclusiveness
• Sustained fast paced growth in the last 2 decades
• Tapering inequality (albeit still high at 50:1), falling
unemployment, significant poverty reduction
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Lessons From Emerging
Regions …
Philippines → Non-inclusive growth
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• Fast paced growth (2nd in Asia behind China in 2012-2013)
• Rising prevalence rate of poverty from 2.4% in 2009 to 2.6% in
2013
• High unemployment (10.3%) and underemployment (12.1%) in
2013
South Africa – Africa’s largest economy
• Laced with widespread poverty, high unemployment, growing
inequality
• 50% unemployment rate among the under-25s
• Income of the richest 10% is 100 times that of the poorest 10%
on average
• Social discontent – destructive protests (and strike actions)
against poverty (and high in-work poverty), joblessness,
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inequitable access to public amenities,
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Lessons From Emerging
Regions …
India
• Elimination of heavy regiment of licenses and
controls
• New industrial policy which ease entry of foreign
firms to operate in the country
• Improve access to good education and health
• Innovative safety net that lifted millions out of
poverty
• Incentives for innovations
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Closing Remarks
• Development institutions and central banks need to
support inclusive growth and transition to green
economy to minimize their vulnerability to climate
change
• Central banks should be more than financiers
• knowledge broker and connect clients to
knowledge centers: in Africa and globally such
as World Bank, IMF, IADB, etc
• Development efforts should focus on:
• Regional Integration - provide local competitive
advantage, large domestic markets
• Private Sector Development
• Governance
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Closing Remarks …
• Africa’s growth though robust remains below
potential
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• Growth needs to be both inclusive and green
• Anchored on sound democratic principles to
eliminate social discontent as evidenced from
Arab Spring
• Energized by vibrant civil society so as to ensure
engagement and enforcement of
accountability
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