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

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Presentation on theme: "Survey of Economic and Social Conditions in Africa 2004-2005 For presentation at the Conference of African Ministers of Finance, Planning and Economic."— Presentation transcript:

1 Survey of Economic and Social Conditions in Africa 2004-2005 For presentation at the Conference of African Ministers of Finance, Planning and Economic Development, 11-13 May 2005, Abuja, Nigeria by Prof. Augustin Fosu Director, Economic and Social Policy Division, ECA

2 Outline  Recent Economic performance  Growth performance by subregions  Fastest & 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

3 African economic performance improves

4 Underlying factors for improved performance 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

5 Better performance in 3 of the 5 sub-regions Central Africa led subregional performance in 2004, followed by East Africa, North Africa, West Africa and, then, Southern Africa

6 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 explained by…

7 Fastest and slowest performers in Africa The fastest growing African countries in 2004 were Chad, Equatorial Guinea, Liberia, Ethiopia, Angola and Mozambique  Chad, Equatorial Guinea & Angola – oil  Ethiopia – recovery in agricultural sector  Liberia  post-conflict economy  substantial external aid in support of its rebuilding efforts Cont’d

8 The slowest growing economies in Africa were Zimbabwe, Seychelles, Cote d’Ivoire, Central African Republic and Gabon  Zimbabwe - 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… Cont’d

9 Real GDP growth rates, top 10 & bottom 5 African countries, 2004 (%)

10 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 MDGs

11 Considerable gains by oil exporters

12 Internal Sources of Growth Macroeconomic stability  Inflation declined  Fiscal deficits eased Current account improved Tourism on the rise Good weather prevailed

13 External Sources of Growth Strong global economic recovery Rising export prices & volumes of most African commodities ODA on the rise FDI flows are up

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

15 FDI inflows to Africa …rebounding Due to  High prices of most key commodities  Enhanced investor perceptions But concentrated in natural resource sectors

16 Some 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

17 Medium-term outlook is positive Africa is projected to grow at 5% in 2005—highest in a decade

18 Upside factors  Improved 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 increase  Continuing improving political stability in many African countries

19 Downside risks  Global 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

20 Has Africa’s growth translated into unemployment or poverty 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

21 Trends in poverty SSA had the highest poverty rate in 2003 With 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

22 Progress towards the MDGs targets 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)

23 Policy Interventions To achieve high & sustainable growth and proper distribution in Africa, policy interventions will be required at different levels:  economic  social  political

24 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 investments  maximizing job creation by minimizing constraints to private sector investments and growth  minimizing the unpredictability of ODA flows  accelerating efforts at regional cooperation

25 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

26 Thank you!

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