African Union Commission Economic Report on Africa 2011 Economic Report on Africa 2011 Governing development in Africa – the role of the state in economic transformation Rob Vos Director, UN-DESA 18 May 2011 New York

African Union Commission 2 Outline of the Report Part I: Recent economic and social developments and emerging development issues Part II: Governing development in Africa

African Union Commission 3 Key messages Trends Positive developments in the global economy for Africa in 2010 Recovery strengthened, but remains uneven across the region and unemployment rates remain high. Continued high dependence on commodity exports despite some diversification Prospects for economic performance in Africa during 2011 are favourable. – However, in the upcoming updated UN forecast, continued political turmoil in North Africa is projected to lead to lower growth for Africa as a whole

African Union Commission 4 All regions slowly recovering from the global crisis

African Union Commission 5 Africa's economic growth rebounded from the financial and economic crises Africa grew at 4.7% in 2010, up from 2.3 per cent in Growth factors included: Rising commodity prices and exports Increasing domestic demand in many countries Increased FDI in extractive industries and aid flows Return of Tourism, etc More diversified exports - manufactures, trade services and tourism.

African Union Commission 6 Growth performance continues to vary considerably across sub-regions and countries Oil-exporting countries grew at 5.2% in 2010 compared with the oil-importing countries rate of 4.0%. Subregional growth in 2010: East Africa (6.8%), West Africa (6%), North Africa (4.7%), Central Africa (4.3%) and Southern Africa (3.3%).

African Union Commission 7 Africa's recovery was largely jobless Job growth and creation was disappointing overall on the continent in The narrow-based economic structure contributed to the high levels of unemployment. Job creation also remained limited in countries with rather modest recovery. Persistent high youth unemployment rate is a cause of concern and a potential source of political instability.

African Union Commission 8 Growth prospects for 2011 (Recently revised downward due to political events) Africas GDP growth rate is expected to accelerate from 4.7 per cent in 2010 to 5 per cent in 2011 – However, the upcoming revised forecast will show lower growth of 3.6% for Africa in 2011, mainly due to the political turmoil in North Africa. Sub-regional growth: – East and West Africa are projected to grew at 6.4% in 2011 – Oil-importing countries (4.6%) and oil-exporting countries (5.4%). The growth rates are still below the levels needed to make significant impact on unemployment and poverty reduction.

African Union Commission 9 Growth prospects for 2011 and downside risks (contd) Outlook for 2011 is subject to potential downside risks and uncertainties: Pace and duration of recovery and growth in Africas economic partners, developing and emerging economies such as India and China, and developed economies in Europe and the US. Political disturbances in NA and other countries. Recurrent adverse weather conditions and heavy dependence on rain-fed agriculture. Premature and severe fiscal tightening Availability of financing especially trade finance, FDI and ODA.

African Union Commission Key messages – contd Challenges Structural transformation is essential for sustained economic growth rates, low growth volatility and decent employment. – Between 1973 and 2010, only six African countries recorded sustained growth; five countries showed sustained structural shifts – Successful economic transformation in emerging economies was achieved by active State intervention – Good governance in Africa should focus on developmental role government, enabling markets and the private sector to function better

African Union Commission Emerging development issues – steering towards sustainable development Economic diversification is key – Green economy model could be win-win: accelerating economic growth, achieve the MDGs and other social development goals while maintaining environmental sustainability – Sustainable agriculture and food security – Green industrialization, based on sustainable energy supplies and transformation of natural resources Such a transformation requires a repositioning of the state in setting creating enabling policies and institutions with adequate incentives and regulations.

African Union Commission Constructing a developmental state in Africa The construction and promotion of developmental States in Africa must involve: – Bold, but credible and integrated development strategies – Enhance stakeholders participation (private sector, civil society) in design and implementation – Use carrot and stick approach to allocation of resources and distribution of rents – Ensure clear accountability and oversight mechanisms – Recognize policy constraints…. contingency planning; fiscal stabilization funds – … and seek to enhance policy space Use WTO flexibility as well as negotiate greater flexibility and more Aid for Trade Negotiate more stable external funding

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