African Economic Outlook 20042005 African Development Bank OECD

African Economic Outlook 2004/2005 African Development Bank / OECD Development Centre

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

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

Coverage 2004/2005: 29 African countries Tunisia Morocco Other Algeria Libya AEO 04/05 Mauritania Egypt Niger Mali Senegal Gambia Chad Guinea-Bissau Eritrea Burkina Faso Guinea Djibouti Togo Côte d'Ivoire Sierra Leone Sudan Nigeria Ethiopia Central African Republic Liberia Cameroon Ghana 89% of GDP, 86% of population Somalia Equatorial Guinea Uganda Congo Gabon Kenya Rwanda Dem. Rep. Congo Burundi Tanzania Angola Malawi Zambia Mozambique Zimbabwe Madagascar Namibia Botswana Swaziland South Africa Lesotho Mauritius

Highlights of 2004/2005 AEO

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

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

Considerable regional variations were observed …

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 59, 8 -4, 7 Equatorial Guinea 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 Rates of real GDP growth (Sources: AEO, IMF, OECD).

Rising oil and metals prices

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

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

Internally, political stability is improving …

Macroeconomic management is improving: Inflation is largely under control. . .

Significant variations in regional inflation rates

Fiscal discipline is also generally good and improving

Regional variations in fiscal balance

Despite recent improvements, major development challenges remain … ü Meeting the Millennium Development Goals (MDGs) remains a major challenge for most African countries ü African economies remain highly vulnerable to both external and domestic shocks

Meeting the MDGs remains a challenge

Further Reforms Required to Make Progress towards the MDGs ü Maintain stable macroeconomic framework by building on recent gains – prudent use of windfall gains is essential ü 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, 73 Export 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 ü ODA -- Commission for Africa recommendation of doubling ODA to Africa by 2010 -- $25 billion/year ü Debt Relief – UK proposal -- 100 percent debt relief on debt owed to the IFIs ü Trade – Doha Round: – Dismantling of remaining trade barriers; removal of agricultural subsidies – Developing Africa’s Capacity to trade

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

Thank you!