African Economic OutlookAfrican Economic Outlook2004/20052004/2005

African Development Bank / OECD African Development Bank / OECD Development CentreDevelopment Centre

Outline of Presentation

The African Economic Outlook (AEO) Project

Highlights of the 2004/2005 Report

Major Development Challenges facing African Countries

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 …

Other AEO 04/05

Algeria

Libya Egypt

Mauritania

Mali

Niger

Chad

Dem.Rep. Congo

Sudan

Central AfricanRepublic

Equatorial Guinea

GabonCongo

Cameroon

Angola

Guinea-BissauGuinea

Sierra Leone

Liberia

Côted'Ivoire

Tunisia

BurkinaFaso

Ghana

NigeriaTogo Ethiopia

Somalia

Djibouti

Eritrea

Kenya

Tanzania

Mozambique

SouthAfrica

Botswana

Zimbabwe

Namibia

Zambia

Swaziland

Lesotho

Malawi

Uganda

BurundiRwanda

Madagascar

SenegalGambia

Morocco

Mauritius

Coverage 2004/2005: 29 African countries

89% of GDP,

86% of population

Highlights of 2004/2005 AEO

Africa had the best GDP growth rate in eight years ...

Africa: Real GDP Growth Rates, 1990-2004 (%)

-1.2

0.9

3.2

5.6

1.3

2.6

3.63.2

3.23.4

3.9

3.5

4.4

5.1

1.5

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Africa excluding North Africa and South Africa : Real GDP Growth Rates,1990-2004 (%)

-1.5

0.5

4.3

6.0

1.1

6.44.6

3.3

4.6

2.62.9

2.9

4.5

1.7

2.3

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Excluding N. Africa and S. Africa, GDP Growth Rate was even

better ...

Considerable regional variations were observed

…

Region 1996-2002 2003 2004(e) 2005(p) 2006(p)Central Africa 3.9 5.0 14.4 4.1 5.5East Africa 4.1 2.3 6.8 5.2 5.1North Africa 4.3 5.1 4.6 4.8 5.2Southern Africa 3.1 2.6 4.0 4.6 5.2West Africa 3.6 7.0 3.4 4.9 4.8Total 3.8 4.4 5.1 4.7 5.2Note: Due to lack of data, these aggregates do not include Liberia and Somalia.Source: Authors' (e) estimate; (p) projection.

Table 1 - Average Growth Rates of African Regions

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).

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).

Factors Behind Improved Growth Performance

•External Factors•Internal Factors

OECD recovery has spurred African economies

0,0

1,0

2,0

3,0

4,0

5,0

6,0

1996 1997 1998 1999 2000 2001 2002 2003a/

2004b/

2005b/

2006b/

Africa

OECD

Rates of real GDP growth (Sources: AEO, IMF, OECD).

Rising oil and metals prices

40

60

80

100

120

140

160

180

200

PetroleumGoldCopperAluminium

Africa is also benefiting from increased aid flows...

0.33 0.32

0.30

0.22

0.25

0.13

0.08

0.09

0.06

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

% o

f G

NI

0

20

40

60

80

100

120

OD

A (

US

$ 20

03 b

illio

n)

ODA as a % of GNI (left scale)

Total ODA(right scale)

Total ODA to Africa(right scale)

ODA to Africa as a % of GNI (left scale)

DAC Members’ ODA: 1990-2003 and simulations to 2006 and 2010, based on Monterrey and subsequent commitments

Decline in Debt / GDP ratio, although still high for poor countries

Africa: Debt / GDP, 1990-2004 (% )

71.3

43.2

48.3

53.953.755.9

60.461.960.9

76.0

59.464.5

68.6

66.5 66.2

30.0

35.0

40.0

45.0

50.0

55.0

60.0

65.0

70.0

75.0

80.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Internally, political stability is improving …

0

100

200

300

400

500

600

1996 1997 1998 1999 2000 2001 2002 2003 2004

Political troubles Trend

Africa: Inflation, 1990-2004 (%)

28.626.2

30.7

27.9

24.5

16.2

42.0

14.2

9.6

11.8

13.5

10.5

9.1

10.0

7.7

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Macroeconomic management is improving: Inflation is largely under

control ...

Significant variations in regional inflation rates

Region 1996-2002 2003 2004(e) 2005(p) 2006(p)Central Africa 31.1 3.5 2.4 3.9 3.5East Africa 5.8 6.8 8.2 5.7 4.5North Africa 3.3 2.5 4.5 4.7 4.1Southern Africa 17.2 15.7 11.2 10.2 9.1West Africa 9.7 11.2 9.9 9.7 6.5Total 11.0 8.3 7.9 7.5 6.2Note: Due to lack of data, these aggregates do not include Liberia and Somalia.Source: Authors' (e) estimate; (p) projection.

Table 2 - Weighted Geometric Average CPI Inflation of African Regions

Africa: Fiscal Balance, 1990-2004 (% of GDP)

-0.3

-3.6

-6.0

-6.3-6.6

-4.4

-4.8

-1.5

-3.9

-2.2

-0.5

-2.2

-3.0

-1.4

0.0

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Fiscal discipline is also generally good and improving

Regional variations in fiscal balance

Region 1996-2002 2003 2004(e) 2005(p) 2006(p)Central Africa -1.1 2.4 3.9 6.7 6.8East Africa -3.4 -3.9 -3.0 -3.9 -4.0North Africa -0.9 -0.2 0.9 2.3 1.8Southern Africa -3.3 -2.8 -3.2 -3.0 -2.9West Africa -1.9 -2.0 3.7 3.0 2.4Total -1.9 -1.4 0.0 0.7 0.3Note: Due to lack of data, these aggregates do not include Liberia and Somalia.Source: Authors' (e) estimate; (p) projection.

Table 3 - Average Budget Balance to GDP Ratio

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

Meeting the MDGs remains a challenge

Progress Towards Achieving Millennium Development Goals

0

20

40

60

80

100

120

Goal 1: ReduceExtreme poverty

by half

Goal 1: … andHunger

Goal 2: NetP rimary

enrolment ratio

Goal 3:Eliminating

Gender Disparity(female primary

ratio)

Goal 3:Eliminating

Gender Disparity(female

secondary ratio)

Goal 4: Reducechild mortality

Goal 7: EnsureEnvironmentalSustainability

Satisfactory Non Statisfactory

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

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 7,73Export Diversification Index (inverse of sum of squared shares of each exported good; lower numbers = less diversified; Source AEO).

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

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

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 Africa’s Capacity to trade

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;

Africa’s development partners should scale up their support in line with commitments

Thank you!