1. 1 Survey of Economic and Social Conditions in Africa, 2006 Economic Commission for Africa Fortieth Session of the Conference of African Ministers of Finance, Planning and Economic Development Presented by: Trade, Finance and Economic Development Division

2. 2 Objectives of the Survey Review recent growth performance at continental and sub-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 areas that deserve the attention of policy makers, focusing on the need for diversification away from the resource sector

3. 3 I. The Global Context World economy sustains moderate growth from 3.5% in 2005 to 3.8% in 2006. Global growth underpinned by high growth in Asian economies. High oil prices, massive global macroeconomic imbalances and tight macroeconomic stances in advanced economies constrain global growth Increased economic diversification, increased domestic demand and regional integration are essential for Africa to promote international competitiveness and sustain growth.

4. 4 II. Overall Strong Performance in Africa in 2006 Africa sustains improved overall economic performance (5.7%), up from 5.3% in 2005 and 5.2% in 2004

5. 5 High growers vs. least performers: growth at the top and stagnation at the bottom Only 3 of the top 5 performers in 2006 were among top performers during 1998- 2006 but the least 5 performers remained the same during 1998- 2006.

6. 6 Factors explaining improved economic performance in Africa in 2006 1) Global economy: Strong global demand for key African export commodities, resulting in high export prices, especially for crude oil, metals and minerals. 2) Improvement in macroeconomic management in many countries  Improved domestic balances, but pressure from oil prices threatens price stability  Overall external balances remain stable  Sustainability of both internal and external balances is a major challenge for oil importers and landlocked countries 3) Debt relief and external capital flows, especially ODA and FDI

7. 7 Factors explaining improved economic performance in 2006 (cont’d) 4) Strong performance in key sectors:  Agriculture remains the main driver of growth in many countries; increased value added through agriculture-related activities such as horticulture (e.g. Kenya and Ethiopia)  Tourism is an important source of foreign exchange earnings in many countries (South Africa, Egypt and Morocco)  Industry is still resource-based  The service sector is large, growing, but remains fragile. 5. Increased political stability (decline in conflicts)

8. 8 Oil economies sustained the same high growth rate (6.1%) in 2006 and 2005, while non-oil economies increased growth from 4.6% in 2005 to 5.2% in 2006.

9. 9 Non-oil non-mineral-rich countries grew even faster than mineral-rich countries thanks to debt relief, aid flows, and improved macroeconomic management, among other factors.

10. 10 Resources remain the key factor explaining variations in sub-regional performance

11. 11 Despite improvement, Africa’s growth is insufficient to meet its development goals From 1998 to 2006, 25 per cent of African countries recorded a growth rate of less than 3%. The growth rates remain very low for the majority of African countries Only 5 countries achieved an average growth rate of 7% or higher from 1998 to 2006. At this pace, most countries will be unable to reach the MDGs by 2015.

12. 12 IV. Social development remains limited: Slow progress towards the MDGs especially in SSA Poverty rate remained virtually unchanged in SSA (44.6% in 1990 and 44% in 2004) and increased in North Africa from 2.2% to 2.4%. Literacy rates rose from 67.4% to 73.1% in SSA and from 66.3% to 84.3% in North Africa. Gender equality improved, with the gender parity ratio rising from 0.8 to 0.88 for SSA and from 0.73 to 0.91 for North Africa. Child and maternal mortality remain high HIV/AIDS and other pandemics remain a major challenge for Africa, calling for more budget allocations for prevention and treatment More needs to be done for Africa to improve access to sanitation and safe water and to ensure environmental sustainability.

13. 13 V. Growth prospects for 2007: Positive outlook for 2007 Projected real GDP growth in 2007 by region

14. 14 Factors of medium-term growth Favourable factors  Global demand for African products is expected to remain upbeat due to economic recovery in major industrialized countries  Continued improvements in macroeconomic fundamentals  Delivery of the promised aid and debt relief will allow African countries to boost expenditures in key sectors including infrastructure and social services.

15. 15 Unfavourable factors  Lack of diversification of production and export base  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 network at the regional level  Political instability in some countries  Weather conditions and fluctuations in commodity prices

16. 16 Policy recommendations Africa needs to increase and sustain growth to accelerate social development through: 1. Improved macroeconomic management 2. Increased domestic investment which requires mobilization of internal and external resources 3. Diversification away from resource sectors and promoting international competitiveness

17. 17 Policy recommendations contd. 4. Improved infrastructure (especially transport and energy supply) 5. Adoption of a more innovative approach to growth and pro-poor policies 6. Fighting HIV/AIDS and other diseases

18. 18 Thank You For Your Attention