AFRICAN ECONOMIC OUTLOOK

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African Economic Outlook 2004/2005
African Development Bank / OECD Development Centre
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Outline of Presentation

• The African Economic Outlook (AEO) Project
• Highlights of the 2004/2005 Report
• Major Development Challenges facing African
  Countries

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The AEO Project...

• Joint Publication of the ADB and the OECD
  Development Centre
• Objective Independent analysis of African
  countries using a common methodology and targeted
  at a broad audience
• Core work Analysis of individual countries,
  overall review of African economy, and focus on a
  major theme each year SMEs in 2004/05
• Improvements in successive editions
• More intensive peer-review process
• Improved modelling and data harmonisation
• Broader Coverage

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Coverage 2004/2005 29 African countries
89 of GDP, 86 of population
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Highlights of 2004/2005 AEO
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Africa had the best GDP growth rate in eight
years ...
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Excluding N. Africa and S. Africa, GDP Growth
Rate was even better ...
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Considerable regional variations were observed
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Newer oil producers are growing most rapidly
2004 (e) 2005 (p)
Angola 10,9 14,7
Chad 31,3 10,8
Congo 4,0 9,4
Equatorial Guinea 59,8 -4,7
Real GDP growth rates, expected (e) and forecast
(p). (Source AEO).
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But reforming oil-importers are also doing quite
well

2004 (e) 2005 (p)
Ghana 5.8 5.9
Senegal 6.0 6.3
Mozambique 7.8 7.7
Tanzania 6.4 7.0
Uganda 5.9 5.4
Real GDP growth rates, expected (e) and forecast (p). (Source AEO). Real GDP growth rates, expected (e) and forecast (p). (Source AEO). Real GDP growth rates, expected (e) and forecast (p). (Source AEO).
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Factors Behind Improved Growth Performance

• External Factors
• Internal Factors

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OECD recovery has spurred African economies
Rates of real GDP growth (Sources AEO, IMF,
OECD).
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Rising oil and metals prices
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Africa is also benefiting from increased aid
flows...
DAC Members ODA 1990-2003 and simulations to
2006 and 2010, based on Monterrey and subsequent
commitments
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Decline in Debt / GDP ratio, although still high
for poor countries
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Internally, political stability is improving
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Macroeconomic management is improving Inflation
is largely under control ...
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Significant variations in regional inflation
rates
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Fiscal discipline is also generally good and
improving
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Regional variations in fiscal balance
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Despite recent improvements, major development
challenges remain

• Meeting the Millennium Development Goals (MDGs)
  remains a major challenge for most African
  countries
• African economies remain highly vulnerable to
  both external and domestic shocks

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Meeting the MDGs remains a challenge
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Further Reforms Required to Make Progress towards
the MDGs

• Maintain stable macroeconomic framework by
  building on recent gains prudent use of
  windfall gains is essential
• Push through structural reforms and improve the
  investment climate
• Privatization of SOEs
• Governance reforms and institution
  building/strengthening
• Financial sector reforms

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Greater effort at diversification has to be made
Libya 1,17
Angola 1,19
Equatorial Guinea 1,23
Nigeria 1,26
Congo 1,52
Guinea Bissau 1,61
Chad 1,65
Burundi 1,66
Gabon 1,70
Sudan 1,71
Congo Democratic Republic 1,78
Africa 7,73
Export Diversification Index (inverse of sum of
squared shares of each exported good lower
numbers less diversified Source AEO).
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Regional cooperation and integration efforts need
to be strengthened

• Take advantage of the NEPAD initiative
• Streamline regional economic groupings
• Greater focus on promoting investment in addition
  to trade
• Greater effort to remove bureaucratic and other
  barriers that still hinder trade and investment

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More efficient use of resources for human capital
development

• Africa would also need to build its human capital
  to compete globally
• More countries are increasing their investments
  in education and health
• Improving service delivery is now a major
  challenge for most

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External Support will remain critical

• ODA -- Commission for Africa recommendation of
  doubling ODA to Africa by 2010 -- 25
  billion/year
• Debt Relief UK proposal -- 100 percent debt
  relief on debt owed to the IFIs
• Trade Doha Round
• Dismantling of remaining trade barriers removal
  of agricultural subsidies
• Developing Africas Capacity to trade

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Conclusion

• Africa doing better due to favorable external
  environment but, as importantly, due to internal
  factors
• Prospects for sustained improvement are good
• African countries would need to deepen their
  reforms and carry out remaining structural
  reforms
• Africas development partners should scale up
  their support in line with commitments

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Thank you!