1. 1 Survey of Economic and Social Conditions in Africa in 2007 Meeting of the Committee of Experts of the 1 st Joint Annual Meetings of the AU Conference of Ministers of Economy and Finance and ECA Conference of Ministers of Finance, Planning and Economic Development 26-29 March 2008. Addis Ababa, Ethiopia

2. 2 Objectives of the Survey Review recent growth performance at continental and regional levels Discuss the underlying factors of performance Examine the progress made in achieving key targets in social development Highlight factors likely to affect growth prospects Highlight key economic and social policy issues that deserve the attention of policy makers.

3. 3 The Global Context World growth slowed down from 3.9 per cent in 2006 to 3.7 per cent 2007 and is expected to slowdown further in 2008. High oil prices combined with turbulence in financial markets and slowdown in import demand in the US have contributed to global slowdown. But these effects have been partially mitigated by domestic demand-led growth in other regions. In this context, Africa has to encourage industrialization along with increased domestic demand and regional integration in order to promote international competitiveness and sustain growth.

4. 4 Africa achieved a 5.8 per cent growth rate in 2007, up from 5.7 per cent in 2006 Real GDP growth (%), 2005-07

5. 5 High growers vs. least performers High growth variability across countries and regions, reflecting the vulnerability of Africa’s growth to developments in commodity markets and political instability

6. 6 Higher growth rates in all regions in 2007 relative to 2006, except North Africa Growth is widely shared across regions; raising regional growth requires addressing regional constraints such as poor infrastructure and energy supply

7. 7 Factors explaining Africa’s economic performance in 2007 Strong commodity demand and continued high prices, especially for oil and minerals, combined with favorable rainfall in most countries. Continued consolidation of macroeconomic stability and improving macroeconomic management as well as greater commitment to economic reforms. However, i. Fiscal sustainability remains a challenge for oil-importing countries ii. Inflationary pressure is intensifying in many African countries iii. External balances are also a concern for oil importing countries iv. Currency appreciation threatens international competitiveness, and v. External debt sustainability is a challenge for many countries; there is a need to increase non-debt generating external resources.

8. 8 Factors explaining Africa’s growth in 2007 (cont’d) Rising oil production in a number of countries and increasing non-fuel exports. Debt relief and increased private capital flows. Decline in political conflicts and wars, especially in West and Central Africa, though peace remains fragile in some parts of the continent.

9. 9 Sectoral performance shows limited diversification of the production base  Industry recorded the highest growth rate (5.7 per cent), followed by agriculture (5.0 per cent).  But industrial growth was driven by high commodity prices, especially for oil and gas, while manufacturing growth remains modest.  Africa’s tourism potential remains largely unexploited, while tourism is becoming a dominant sector in economic activity worldwide.

10. 10 Economic growth in Africa has not yet translated into meaningful social development and inclusion of vulnerable groups Unemployment remains high at 11.5% and 9.7% in 2006 in NA and Africa excluding NA, respectively. Poverty rates are low in NA, but high and almost unchanged in most countries in the rest of the continent. Overall primary school enrollment rate increased to about 70%, but remains below target. Gender equality improved across Africa, while child and maternal mortality remain high HIV/AIDS and other pandemics remain a major challenge for Africa: 68% of the 33.2 million people living with AIDS in the world are in Africa. The AIDS prevalence rate was 5% in Africa excluding NA in 2007. Africa’s youth continue to face many challenges in the labour market, while the elderly and the people with special needs are marginalized.

11. 11 Growth prospects for 2008: brighter outlook despite risks

12. 12 Factors of medium-term growth Favourable factors It is assumed that robust demand for commodity exports and high prices will continue with high growth in Asia and in the absence of a significant slowdown in Europe. Continued effective macroeconomic management, especially efforts to contain inflationary pressures and ensure sound exchange rate and commodity revenue management. Delivery of the promised aid and debt relief beside increased private capital inflows and domestic savings.

13. 13 Unfavourable factors  Risk of sharper than expected slowdown in the US economy and a fall in global commodity demand and prices.  High oil prices will hurt oil importers through the current account and inflationary pressures  Inefficient public infrastructure and unreliable energy supply at the national level as well as poor integration of transportation and energy networks at the regional level  Political instability in some countries  Weather conditions and inadequate agricultural technology (which amplifies the effects of shocks).

14. 14 Policy recommendations Africa needs effective national and regional strategies to address key economic and social development challenges, including policies to: Accelerate and sustain growth. This includes: Higher investment in infrastructure and energy supply Incentives for investment in new activities and sectors to broaden production and export base. Increase domestic resource mobilization Maximize benefits and confront the challenges of high oil prices Translate development financing commitments into action Translate economic growth into social development Integrate socially excluded groups and provide for their needs

15. 15 Thank You For Your Attention