Economic Report in Africa UNECA

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Survey of Economic and Social Conditions in
Africa, 2006 Economic Commission for
Africa Fortieth Session of the Conference of
African Ministers of Finance, Planning and
Economic Development Presented by Trade,
Finance and Economic Development Division
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Objectives of the Survey

• Review recent growth performance at continental
  and sub-regional levels
• Discuss the underlying factors of performance
• Examine the progress made in achieving key
  targets in social development
• Highlight factors likely to affect growth
  prospects
• Highlight key areas that deserve the attention of
  policy makers, focusing on the need for
  diversification away from the resource sector

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I. The Global Context

• World economy sustains moderate growth from 3.5
  in 2005 to 3.8 in 2006.
• Global growth underpinned by high growth in Asian
  economies.
• High oil prices, massive global macroeconomic
  imbalances and tight macroeconomic stances in
  advanced economies constrain global growth
• Increased economic diversification, increased
  domestic demand and regional integration are
  essential for Africa to promote international
  competitiveness and sustain growth.

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II. Overall Strong Performance in Africa in 2006

• Africa sustains improved overall economic
  performance (5.7), up from 5.3 in 2005 and 5.2
  in 2004

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High growers vs. least performers growth at the
top and stagnation at the bottom

• Only 3 of the top 5 performers in 2006 were among
  top performers during 1998-2006 but the least 5
  performers remained the same during 1998-2006.

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Factors explaining improved economic performance
in Africa in 2006

• 1) Global economy Strong global demand for key
  African export commodities, resulting in high
  export prices, especially for crude oil, metals
  and minerals.
• 2) Improvement in macroeconomic management in
  many countries
• Improved domestic balances, but pressure from oil
  prices threatens price stability
• Overall external balances remain stable
• Sustainability of both internal and external
  balances is a major challenge for oil importers
  and landlocked countries
• 3) Debt relief and external capital flows,
  especially ODA and FDI

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Factors explaining improved economic performance
in 2006 (contd)

• 4) Strong performance in key sectors
• Agriculture remains the main driver of growth in
  many countries increased value added through
  agriculture-related activities such as
  horticulture (e.g. Kenya and Ethiopia)
• Tourism is an important source of foreign
  exchange earnings in many countries (South
  Africa, Egypt and Morocco)
• Industry is still resource-based
• The service sector is large, growing, but remains
  fragile.
• 5. Increased political stability (decline in
  conflicts)

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• Oil economies sustained the same high growth rate
  (6.1) in 2006 and 2005, while non-oil economies
  increased growth from 4.6 in 2005 to 5.2 in
  2006.

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• Non-oil non-mineral-rich countries grew even
  faster than mineral-rich countries thanks to debt
  relief, aid flows, and improved macroeconomic
  management, among other factors.

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Resources remain the key factor explaining
variations in sub-regional performance
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Despite improvement, Africas growth is
insufficient to meet its development goals
 
 

• From 1998 to 2006, 25 per cent of African
  countries recorded a growth rate of less than 3.
• The growth rates remain very low for the
  majority of African countries
• Only 5 countries achieved an average growth rate
  of 7 or higher from 1998 to 2006.
• At this pace, most countries will be unable to
  reach the MDGs by 2015.

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IV. Social development remains limited Slow
progress towards the MDGs especially in SSA

• Poverty rate remained virtually unchanged in SSA
  (44.6 in 1990 and 44 in 2004) and increased in
  North Africa from 2.2 to 2.4.
• Literacy rates rose from 67.4 to 73.1 in SSA
  and from 66.3 to 84.3 in North Africa.
• Gender equality improved, with the gender parity
  ratio rising from 0.8 to 0.88 for SSA and from
  0.73 to 0.91 for North Africa.
• Child and maternal mortality remain high
• HIV/AIDS and other pandemics remain a major
  challenge for Africa, calling for more budget
  allocations for prevention and treatment
• More needs to be done for Africa to improve
  access to sanitation and safe water and to ensure
  environmental sustainability.

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V. Growth prospects for 2007 Positive outlook
for 2007 Projected real GDP growth in 2007 by
region
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Factors of medium-term growth

• Favourable factors
• Global demand for African products is expected to
  remain upbeat due to economic recovery in major
  industrialized countries
• Continued improvements in macroeconomic
  fundamentals
• Delivery of the promised aid and debt relief will
  allow African countries to boost expenditures in
  key sectors including infrastructure and social
  services.

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• Unfavourable factors
• Lack of diversification of production and export
  base
• High oil prices will hurt oil importers through
  the current account and inflationary pressures
• Inefficient public infrastructure and unreliable
  energy supply at the national level as well as
  poor integration of transportation and energy
  network at the regional level
• Political instability in some countries
• Weather conditions and fluctuations in commodity
  prices

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Policy recommendations

• Africa needs to increase and sustain growth to
  accelerate social development through
• Improved macroeconomic management
• Increased domestic investment which requires
  mobilization of internal and external resources
• Diversification away from resource sectors and
  promoting international competitiveness

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Policy recommendations contd.

• 4. Improved infrastructure (especially transport
  and energy supply)
• 5. Adoption of a more innovative approach to
  growth and pro-poor policies
• 6. Fighting HIV/AIDS and other diseases

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Thank You For Your Attention