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
Real GDP growth rates, expected (e) and forecast
(p). (Source AEO).
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But reforming oil-importers are also doing quite
well

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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
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!