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Economic and Social Conditions in Africa. ECA Presentation to the Committee of Experts 29-30 May 2003 Addis Ababa. Overview. Economic growth in 2002 Trade---commodity prices Finance---ODA, FDI HIV/AIDS Poverty Medium-term Outlook. African economic performance was below expectations.
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Economic and Social Conditions in Africa ECA Presentation to the Committee of Experts 29-30 May 2003 Addis Ababa
Overview • Economic growth in 2002 • Trade---commodity prices • Finance---ODA, FDI • HIV/AIDS • Poverty • Medium-term Outlook
Distribution of GDP growth rates of Africa, 1998-2003 (Number of countries)
Real GDP growth rates, the top 10 and the bottom 5 African countries, 2002 (%)
Unfavorable weather stunted agriculture • In Kenya flooding affected 30,000 people. • In Northern Senegal flooding killed 500,000 livestock, destroyed 20,000 homes, and damaged 2,500 hectares of crops. • Algeria agricultural output fell by 3.2% in 2002, partly because of flooding in the east in July and August. • Tunisia’s agricultural output declined by 14% • Botswana, Ethiopia, Lesotho, Malawi, Mauritania, Namibia, Niger, Swaziland, Tunisia, Zambia, and Zimbabwe suffered severe drought.
Despite heterogeneous conditions performance was generally even
Largest economies---mixed performance • South Africa grew by 3.5% up from 2% ---driven by higher precious metal prices, strong tourism receipts and domestic demand • Nigeria contracted by 3% amid oil cutbacks, political uncertainty and excessive government spending that pushed up inflation
Largest economies—mixed (contd.) • GDP growth in Algeria was weak at 1.9% down from 3% in 2001. • GDP dominated by investments in oil sector but constrained by OPEC quota • Inflation spiralled upwards and current account worsened to 14% from 8 % in 2001 • high youth unemployment and the pace of reforms clouded the outlook.
Regional Inflation in check… • CPI inflation fell to 7.8% down from 15% in 2001 reflecting increased fiscal discipline across the region • However, inflationary pressures remain a concern in Angola, Nigeria, Zambia and Zimbabwe
But the external account worsened • Regional current account deficit increased to 2% of GDP • Due to a decline in the surpluses of Nigeria and Algeria • This was offset in part by a current account surplus in South Africa as a result of higher prices for gold and other precious metals
…amid heightened global uncertainty • U.S. economy slowed appreciably in Q2 • In Q3 despite volatile downward spiral in equity prices, consumer and business sentiment deteriorated as new orders for goods and services stagnated
World Trade • In H1 world trade was slowly recovering from its worst growth performance in two decades • Oil prices rose markedly—topping USD 35 at end of 2002 fuelled by war fears • Gold was also up by 17% to USD 320/oz • Coffee was recovering from its lows thanks to expectations of a lower Brazilian crop.
Intra-African trade is low • Intra-Africa trade accounts for only 12% of Sub-Saharan exports, up 8% from 1989. • Five countries dominate Intra-African trade—Côte d’Ivoire, Nigeria, Kenya, Zimbabwe, and Ghana. • Very little or no trade occurs between countries that are geographically distant, such as Nigeria and Tanzania.
Aid—Pledges increase • European union ---all members should meet or exceed the EU average of 0.33% by 2006 • US increased its ODA by 50% through Millennium Challenge Account yielding an extra $15 billion through 2006 • Canada—pledged CAN$6 billion over five years
Dramatic drop in FDI $17B $6B
29.4M adults and children live with HIV/AIDS as of end 2002 Eastern Europe & Central Asia 1.2 million Western Europe 570 000 North America 980 000 East Asia & Pacific 1.2 million North Africa & Middle East 550 000 South & South-East Asia 6 million Caribbean 440 000 Sub-Saharan Africa 29.4 million Latin America 1.5 million Australia & New Zealand 15 000 Total: 42 million
2.4M adult and child deaths from HIV/AIDS during 2002 Eastern Europe & Central Asia 25 000 Western Europe 8 000 North America 15 000 East Asia & Pacific 45 000 North Africa & Middle East 37 000 South & South-East Asia 440 000 Caribbean 42 000 Sub-Saharan Africa 2.4 million Latin America 60 000 Australia & New Zealand <100 Total: 3.1 million
Africa needs 40% of global resources to tackle HIV/AIDS epidemic Global Resources Needed by Region 16,000 14,000 Latin America & Carribean 12,000 Western & Eastern Europe & Millions of US Dollars 10,000 Central Asia North Africa & Middle East 8,000 East Asia & Pacific 6,000 South & South-East Asia Sub-Saharan Africa 4,000 2,000 - 2001 2002 2003 2004 2005 2006 2007
Annual cost per person for triple therapy in Africa (US$) $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Drug Access Initiative Domestic production Accelerated access initiative February-April 2001 offers 1991 1993 1995 1997 1999 2001 2003 Increasingly affordable prices
Poverty predicted to rise by 2015 Millions Percent 500 50 * * * * 45 400 426 40 * 300 361 35 302 200 242 30 217 100 25 0 20 2015 low-case 1987 1990 1998 2015 base case scenario scenario Source: World Bank (2001)
Medium Term Outlook • Sources of growth---primary commodities and natural resources--- remain fragile and vulnerable to exogenous shocks and subsidies • Political determinants of growth---conflict weighing on economic performance and FDI • Private sector performance is spotty—strong in South and North and weak elsewhere • Agricultural modernization is stalled reducing prospects for poverty reduction • Underlying macroeconomic fundamentals continues to improve. Growth of 4 % envisaged