Overview of Recent Economic and Social Conditions in Africa Economic Commission for Africa Addis Ababa

Outline of Presentation Africa’s Recent Economic Performance Africa’s Recent Economic Performance Comparison Across Regions Comparison Across Regions Explanations for Africa’s Economic Performance Explanations for Africa’s Economic Performance Relation to the Millennium Development Goals Relation to the Millennium Development Goals The Way Forward The Way Forward

Africa’s Recent Economic Performance Relative to the 1980s and the early 1990s, there has been an improvement in Africa’s economic performance Relative to the 1980s and the early 1990s, there has been an improvement in Africa’s economic performance Annual average growth rate of real GDP was 2.1% over the period ; 5.4% in ; and 3.2% in Annual average growth rate of real GDP was 2.1% over the period ; 5.4% in ; and 3.2% in In 2003, real GDP growth rate in the region was 3.6%, up from 3.2% in In 2003, real GDP growth rate in the region was 3.6%, up from 3.2% in 2002.

….distribution of the 2003 growth rate is uneven across sub-regions

How does Africa’s economic Performance Compare to those of other regions? World Output United States Euro Area Japan United Kingdom Brazil China India Africa

Explaining Africa’s Economic Performance As in the past, global and domestic factors account for Africa’s recent economic performance As in the past, global and domestic factors account for Africa’s recent economic performance

Global Factors Strengthening of growth in the global economy Strengthening of growth in the global economy World output increased from 3.0% in 2002 to 3.9% in Africa’s growth rate in 2003 is close to that of world output. World output increased from 3.0% in 2002 to 3.9% in Africa’s growth rate in 2003 is close to that of world output. Events in the global economy affect Africa because countries in the region depend on exports for revenue as well as foreign exchange needed for imports of intermediate and final goods used by domestic firms and consumers Events in the global economy affect Africa because countries in the region depend on exports for revenue as well as foreign exchange needed for imports of intermediate and final goods used by domestic firms and consumers

Increase in commodity prices, mostly in the second half of This has a positive effect on growth because several countries in the region depend on export of commodities Increase in commodity prices, mostly in the second half of This has a positive effect on growth because several countries in the region depend on export of commodities HIPC debt relief has eased debt burdens in recipient countries thereby boosting growth. HIPC debt relief has eased debt burdens in recipient countries thereby boosting growth.

Domestic Factors An improvement in the macroeconomic policy environment: An improvement in the macroeconomic policy environment:  Low current account deficit  Better fiscal management  Low inflation Relatively good weather condition, especially in North Africa Relatively good weather condition, especially in North Africa Reduction of political instability in several countries: Liberia, Angola, Democratic Republic of Congo etc. Reduction of political instability in several countries: Liberia, Angola, Democratic Republic of Congo etc.

Why has Recent Growth Performance Been Modest? The negative contagious effect of continuing political instability in some countries in the region: Cote d’Ivoire, Zimbabwe The negative contagious effect of continuing political instability in some countries in the region: Cote d’Ivoire, Zimbabwe Higher oil prices, which have negative effects on growth in oil importing countries in the region Higher oil prices, which have negative effects on growth in oil importing countries in the region Slow pace of recovery in the Euro Area, an important trading partner of several African countries. Slow pace of recovery in the Euro Area, an important trading partner of several African countries.

Relation to Millennium Development Goals Recent improvements in economic performance in Africa are insufficient to address the key development challenge of the continent Recent improvements in economic performance in Africa are insufficient to address the key development challenge of the continent There is the need to find ways to increase as well as ensure the sustainability of growth in the region There is the need to find ways to increase as well as ensure the sustainability of growth in the region This is particularly important because, if current growth trends continue, several countries in the region cannot achieve the Millennium Development Goals (MDGs) This is particularly important because, if current growth trends continue, several countries in the region cannot achieve the Millennium Development Goals (MDGs)

…In 2003, only 4 countries achieved the growth target required to meet the MDGs

The Way Forward Achieving sustained economic growth and poverty reduction remains the key challenge facing the African region Achieving sustained economic growth and poverty reduction remains the key challenge facing the African region Confronting this challenge effectively requires actions at the domestic as well as international level. Confronting this challenge effectively requires actions at the domestic as well as international level.

Domestic Actions Sustained macroeconomic stability as well as an improvement in the investment environment Sustained macroeconomic stability as well as an improvement in the investment environment Reducing the incidence of conflicts Reducing the incidence of conflicts Increasing the pace of regional integration Increasing the pace of regional integration Dealing with the HIV/AIDS pandemic Dealing with the HIV/AIDS pandemic

Instituting a credible commitment mechanism to reduce the risk of policy reversals and implementation failures. The African Peer Review Mechanism can play a vital role here Instituting a credible commitment mechanism to reduce the risk of policy reversals and implementation failures. The African Peer Review Mechanism can play a vital role here Paying more attention to the nature and quality of growth to ensure that it is pro-poor Paying more attention to the nature and quality of growth to ensure that it is pro-poor Maximizing the gains from the PRSP process by, for example, ensuring that funds released from HIPC debt relief are used for projects that have significant impact on poverty Maximizing the gains from the PRSP process by, for example, ensuring that funds released from HIPC debt relief are used for projects that have significant impact on poverty

International Actions Finding more effective solutions to the debt issue. Improving the HIPC process will be a good start Finding more effective solutions to the debt issue. Improving the HIPC process will be a good start Dealing effectively with the marginalization of Africa in the global economy Dealing effectively with the marginalization of Africa in the global economy  More market access  Reduction of OECD agricultural support  Enhanced Special and Differential Treatment Provisions  More and better aid flows

Enhanced mutual accountability between Africa and its development partners Enhanced mutual accountability between Africa and its development partners Strengthening the PRSP process Strengthening the PRSP process  More local ownership  More resources  Paying attention to infrastructure provision