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Africa and the global crisis: Impact and way forward

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After more than a half decade of consecutive year of sustained growth, real gdp growth is expected to slump to 3% in 2009, as the crisis hits. While the crisis effects the entire world and developed …

After more than a half decade of consecutive year of sustained growth, real gdp growth is expected to slump to 3% in 2009, as the crisis hits. While the crisis effects the entire world and developed countries fall into recession, the picture for Africa, while fragile, is not without hope.

Published in: Business, News & Politics

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    • 1. 23 April 2009 José Gijon Spalla Head, Africa Desk OECD Development Centre Africa and the global crisis: Impact and way forward Africa Forum, Paris 5 June, 2009
    • 2. Growth Africa still growing despite the crisis Source : OECD Development Centre / African Development Bank, 2009 Δ = 6.6% Δ = 4.1% Δ = 3.5% Δ = 4.8% Real GDP Growth (%)
    • 3. Global Crisis … staggered impacts are to be expected
      • Weaker fundamentals and dependent on one commodity
        • Angola, Chad, DRC
      • Stronger fundamentals but dependent on one/few commodity/ies
        • Botswana, Algeria, Cameroon
      • Weaker fundamentals but less dependent on one commodity
        • Tanzania, Ghana, Ethiopia
      • Stronger fundamentals and less dependent on one commodity
        • Tunisia, Uganda, Kenya
      Time
    • 4. Global Crisis What does 3 points growth deceleration imply?
      • Deceleration of economic activity and trade outflows will cause a government revenue increase of just 3%, after an average nominal increase of 20% over the last 8 years.
      • Decrease in private investments by 4%, FDIs are expected to decrease by 10-20 %.
      • Stagnation in public expenditure and decrease in investment (7%) in 2009
      Total African current and capital expenditure 2000-10 Source : OECD Development Centre / African Development Bank, 2009
    • 5.
      • For the first time in a decade, GDP per capita will decrease in Africa
      Global Crisis What does 3 points growth deceleration imply?
      • This represents a threat to:
      • Progress towards MDGs
      • Recent progress in poverty reduction
      • Political stability (mostly in fragile states)
    • 6. Global Crisis Fiscal balances will deteriorate significantly * Including grants ** Excluding Zimbabwe , Estimations for 20078and predictions for 2009/10 Source : OECD Development Centre / African Development Bank, 2008 Source : OECD Development Centre, African Economic Outlook, 2009 Inflation Current Account Fiscal balance 2008 (e) 2009 (p) February 2009 (p) May External Current Account* (% GDP) 3.3 -4.4 -5.3 2008 (e) 2009 (p) February 2009 (p) May Overall fiscal balance* (% GDP) 2.8 -5.4 -5.8 2008 (e) 2009 (p) February 2009 (p) May Consumer prices 11.6 8.1 8.4
    • 7. Beyond the Crisis Africa today is more resilient to exogenous shocks
      • Over recent years, terms of trade improved and good macro management in many countries strengthened fiscal balances
      • HIPC initiative significantly reduced debt levels and composition in many countries
      • Politically more stable than in past decades
      • Africa is more integrated with the world economy and less dependent on traditional OECD markets
      • Governments’ efforts in nurturing private sector and enterprise resulted in steady improvements in business climate indicators
              • Total trade with China has increased tenfold in the past decade to reach USD 106 billion in 2008
      2000-05 2008(e) Fiscal balance, % GDP -1.4 2.8 Current Account, % GDP 0.6 3.3 2005 2008 Total external Debt/GDP, % 110.6 20.8 Debt service / exports, % 20.8 4.7
    • 8. It’s time for Africa to tap its unexploited potential Beyond the Crisis
      • AEO 09: Innovation and ICT
      • ICTs are an engine of endogenous growth : they contribute to improve the local business environment by fostering markets development, overcoming infrastructural bottlenecks and reducing production costs
      • ICTs foster human development allowing a better acces to basic services
      • ICTs in Africa represent a new innovation fronteer , combining existing technologies with innovative applications, suited to the local environment and constraints.
      • Domestic Markets : More attention should be given to fostering domestic investment and domestic demand
      • Regional Markets : Only 9.5% of total African trade is regional
      • Structural reforms are necessary to increase domestic resource mobilisation, overcome infrastructural hurdles and improve the business climate
    • 9. 23 April 2009 José Gijon Spalla Head, Africa Desk OECD Development Centre Africa and the global crisis: Impact and way forward Africa Forum, Paris 5 June, 2009