Significantly lower growth expectations for Africa
GDP growth on the African continent is expected to be 2,8 percent during 2009. This is significantly lower than during the last five years, when economic growth has stayed above 5,5 percent each year. Compared to other developing countries, Sub-Saharan African economies have so far managed the global economic crisis relatively well. But the economic crisis still represents both a challenge and an opportunity for the continent and its people.
These are messages emerging from two recent assessments of Africa’s economic situation – The World Economic Forum on Africa, held in the Cape Town, South Africa 10-12 June, and the African Economic Outlook report, released in May and produced by the Africa Development Bank, the UN Economic Commission for Africa and the OECD Development Centre.
At the World Economic Forum on Africa in Cape Town, African political and economic leaders gathered to discuss the current economic situation. (http://www.weforum.org/en/events/WorldEconomicForumonAfrica2009/index.htm)
Summing up two days of intensive discussions and workshops that addressed the short-term economic outlook, as well as Africa’s longer-term development needs, key leaders took a relatively optimistic view. They said the continent’s resources – both human and physical – leave it well positioned to return to a rapid growth path, as long as governments move aggressively to deliver on their commitments to market reforms, political accountability and investment in infrastructure and education.
“I agree that Africa has many opportunities,” said Jacob Zuma, President of South Africa. “The challenge comes back to the leadership: Are we able to see those opportunities and are we able to utilize the appropriate structures to take advantage of them.”
The imperative to move more aggressively and ambitiously extends to Africa’s role on the world stage, asserted Graça Machel, who among other is Founder and President, Foundation for Community Development (FDC), Mozambique. The continent’s leaders, she said, not only need to assert themselves more strongly in the G20 and other multilateral decision-making bodies, they must also ensure that those gains are maintained in future years. “We need to put Africa in a position where it will never again be marginalized and ignored,” Machel said. Similarly, she added, under-represented groups such as women and youth must be incorporated in both global and African power structures. “Women bring talent, they bring knowledge, they bring expertise, they bring entrepreneurship,” Machel said. “It makes sense they have to be part of the redesign of the world.”
More than 900 participants from 50 countries participate in the 19th World Economic Forum on Africa.
The 2009 African Economic Outlook (http://www.africaneconomicoutlook.org/en/) focuses on Innovations in Information and Communications Technologies (ICTs). It also presents a comprehensive analysis of the economic, social and political developments on the continent.
The report was presented in Dakar, Senegal at the 44th African Development Bank Annual Meetings, in Paris at the Centre d'Accueil de la Presse Etrangère (CAPE) and in Berlin at the German Chamber of Commerce in May. The Report is produced by the OECD Development Centre, the African Development Bank and the United Nations Economic Commission for Africa.
The international economic environment facing Africa has turned decisively negative. GDP in the OECD countries is expected to contract by 4.3 per cent in 2009 and to be virtually flat in 2010. Growth in emerging economies is also expected to slow dramatically. Not surprisingly, the outlook for Africa has been adversely affected by the global recession. Economic growth in Africa is expected to be only 2.8 per cent in 2009, less than half of the 5.7 per cent estimated for 2008. Any further worsening of international economic conditions could well reduce the growth prospects for Africa in 2009 and 2010 even further.
The African Economic Outlook report assesses that the steady process of integration of the continent into the global economy that occurred during the last 15 years, has increased the vulnerability of Africa to drastic falls in financial flows, such as foreign direct investment, trade credit and remittances and to reductions in export earnings. A greater-than-expected fall in these flows will certainly have negative consequences for African growth. On the other hand, the impact of these negative effects could – at least partially – be offset by the prudent macroeconomic management (See Box 7) of most African countries during the last decade, as well as increased trade links with China, India and other emerging economies. Moreover, more than 60 per cent of the population live in rural areas, are dependent on domestic food production, and are thus somewhat less vulnerable to external shocks.
In 2008, growth was driven by the commodity-price boom, which peaked at mid-year and had clearly collapsed by the end of the year, accompanied by strong growth in private investment. Growing conditions in the agricultural sector were also generally favorable. Countries were beginning to have problems with controlling inflation, but, by and large, were continuing to reap the benefits of sound macroeconomic policies. As in previous years, oil exporters fared better than oil importers. All countries had to cope with higher prices of food and fertilizers. Thus, the gap in GDP growth rates between the two groups of countries widened to two percentage points. Growth would have been somewhat higher for the oil importing countries were it not for the energy crisis in South Africa and the post-election civil unrest in Kenya.
The contrast with the growth projected for 2009 is striking. Growth is expected to be markedly lower in both groups. However, the impact of the global crisis is expected to be felt more strongly in the oil-exporting countries (and mineral exporters) than in more diversified economies and in those exporting certain agricultural commodities such as beverages. Thus, the net oil importers can expect GDP growth of 3.3 per cent in 2009 compared to 2.4 per cent for the net oil exporters.
GDP growth is expected to pick up in 2010 when the average real GDP growth rate for the continent as a whole is expected to be 4.5 per cent, with net oil-exporting and net oil-importing countries growing at the same pace.
These forecasts are based on a number of plausible but somewhat optimistic assumptions, suggesting that they are subject to significant downside risk such as a more severe and prolonged international economic recession than expected, and greater than expected falls in aid, remittances, capital and trade flows.