Economic and Social Conditions in Africa

1
Economic and Social Conditions in Africa

• ECA Presentation to the Committee of Experts
• 29-30 May 2003
• Addis Ababa

2
Overview

• Economic growth in 2002
• Trade---commodity prices
• Finance---ODA, FDI
• HIV/AIDS
• Poverty
• Medium-term Outlook

3
African economic performance was below
expectations
4
Distribution of GDP growth rates of Africa,
1998-2003 (Number of countries)
 

5
Real GDP growth rates, the top 10 and the bottom
5 African countries, 2002 ()
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Unfavorable weather stunted agriculture

• In Kenya flooding affected 30,000 people.
• In Northern Senegal flooding killed 500,000
  livestock, destroyed 20,000 homes, and damaged
  2,500 hectares of crops.
• Algeria agricultural output fell by 3.2 in 2002,
  partly because of flooding in the east in July
  and August.
• Tunisias agricultural output declined by 14
• Botswana, Ethiopia, Lesotho, Malawi, Mauritania,
  Namibia, Niger, Swaziland, Tunisia, Zambia, and
  Zimbabwe suffered severe drought.

7
Despite heterogeneous conditions performance was
generally even
8
Largest economies---mixed performance

• South Africa grew by 3.5 up from 2 ---driven
  by higher precious metal prices, strong tourism
  receipts and domestic demand
• Nigeria contracted by 3 amid oil cutbacks,
  political uncertainty and excessive government
  spending that pushed up inflation

9
Largest economiesmixed (contd.)

• GDP growth in Algeria was weak at 1.9 down from
  3 in 2001.
• GDP dominated by investments in oil sector but
  constrained by OPEC quota
• Inflation spiralled upwards and current account
  worsened to 14 from 8 in 2001
• high youth unemployment and the pace of reforms
  clouded the outlook.

10
Regional Inflation in check

• CPI inflation fell to 7.8 down from 15 in 2001
  reflecting increased fiscal discipline across the
  region
• However, inflationary pressures remain a concern
  in Angola, Nigeria, Zambia and Zimbabwe

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But the external account worsened

• Regional current account deficit increased to 2
  of GDP
• Due to a decline in the surpluses of Nigeria and
  Algeria
• This was offset in part by a current account
  surplus in South Africa as a result of higher
  prices for gold and other precious metals

12
amid heightened global uncertainty

• U.S. economy slowed appreciably in Q2
• In Q3 despite volatile downward spiral in equity
  prices, consumer and business sentiment
  deteriorated as new orders for goods and
  services stagnated

13
U.S. recovery pauses
14
growth in Europe remained weak
15
Is this a double dip slowdown?
 
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World Trade

• In H1 world trade was slowly recovering from its
  worst growth performance in two decades
• Oil prices rose markedlytopping USD 35 at end of
  2002 fuelled by war fears
• Gold was also up by 17 to USD 320/oz
• Coffee was recovering from its lows thanks to
  expectations of a lower Brazilian crop.

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Intra-African trade is low

• Intra-Africa trade accounts for only 12 of
  Sub-Saharan exports, up 8 from 1989.
• Five countries dominate Intra-African tradeCôte
  dIvoire, Nigeria, Kenya, Zimbabwe, and Ghana.  
• Very little or no trade occurs between countries
  that are geographically distant, such as Nigeria
  and Tanzania.

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AidPledges increase

• European union ---all members should meet or
  exceed the EU average of 0.33 by 2006
• US increased its ODA by 50 through Millennium
  Challenge Account yielding an extra 15 billion
  through 2006
• Canadapledged CAN6 billion over five years

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ODA by sector shows worrying trends
20
Dramatic drop in FDI
17B
6B
21
29.4M adults and children live with HIV/AIDS as
of end 2002
Eastern Europe Central Asia 1.2 million
Western Europe 570 000
North America 980 000
East Asia Pacific 1.2 million
North Africa Middle East 550 000
South South-East Asia 6 million
Caribbean 440 000
Sub-Saharan Africa 29.4 million
Latin America 1.5 million
Australia New Zealand 15 000
Total 42 million
22
2.4M adult and child deaths from HIV/AIDS during
2002
Eastern Europe Central Asia 25 000
Western Europe 8 000
North America 15 000
East Asia Pacific 45 000
North Africa Middle East 37 000
South South-East Asia 440 000
Caribbean 42 000
Sub-Saharan Africa 2.4 million
Latin America 60 000
Australia New Zealand lt100
Total 3.1 million
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Africa needs 40 of global resources to tackle
HIV/AIDS epidemic
Global Resources Needed by Region
16,000
14,000
Latin America Carribean
12,000
Western Eastern Europe
Millions of US Dollars
10,000
Central Asia
North Africa Middle East
8,000
East Asia Pacific
6,000
South South-East Asia
Sub-Saharan Africa
4,000
2,000
-
2001
2002
2003
2004
2005
2006
2007
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Increasingly affordable prices
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Poverty predicted to rise by 2015
Millions
Percent
500
50




45
400
426
40

300
361
35
302
200
242
30
217
100
25
0
20
2015 low-case
1987
1990
1998
2015 base case
scenario
scenario
Source World Bank (2001)
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But..some are making inroads into poverty
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Medium Term Outlook

• Sources of growth---primary commodities and
  natural resources--- remain fragile and
  vulnerable to exogenous shocks and subsidies
• Political determinants of growth---conflict
  weighing on economic performance and FDI
• Private sector performance is spottystrong in
  South and North and weak elsewhere
• Agricultural modernization is stalled reducing
  prospects for poverty reduction
• Underlying macroeconomic fundamentals continues
  to improve. Growth of 4 envisaged

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Thank you!