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 countries fall into recession, the picture for Africa, while fragile, is not without hope.

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  • Africa and the global crisis: Impact and way forward

    1. 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. 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. 3. Global Crisis … staggered impacts are to be expected <ul><li>Weaker fundamentals and dependent on one commodity </li></ul><ul><ul><li>Angola, Chad, DRC </li></ul></ul><ul><li>Stronger fundamentals but dependent on one/few commodity/ies </li></ul><ul><ul><li>Botswana, Algeria, Cameroon </li></ul></ul><ul><li>Weaker fundamentals but less dependent on one commodity </li></ul><ul><ul><li>Tanzania, Ghana, Ethiopia </li></ul></ul><ul><li>Stronger fundamentals and less dependent on one commodity </li></ul><ul><ul><li>Tunisia, Uganda, Kenya </li></ul></ul>Time
    4. 4. Global Crisis What does 3 points growth deceleration imply? <ul><li>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. </li></ul><ul><li>Decrease in private investments by 4%, FDIs are expected to decrease by 10-20 %. </li></ul><ul><li>Stagnation in public expenditure and decrease in investment (7%) in 2009 </li></ul>Total African current and capital expenditure 2000-10 Source : OECD Development Centre / African Development Bank, 2009
    5. 5. <ul><li>For the first time in a decade, GDP per capita will decrease in Africa </li></ul>Global Crisis What does 3 points growth deceleration imply? <ul><li>This represents a threat to: </li></ul><ul><li>Progress towards MDGs </li></ul><ul><li>Recent progress in poverty reduction </li></ul><ul><li>Political stability (mostly in fragile states) </li></ul>
    6. 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. 7. Beyond the Crisis Africa today is more resilient to exogenous shocks <ul><li>Over recent years, terms of trade improved and good macro management in many countries strengthened fiscal balances </li></ul><ul><li>HIPC initiative significantly reduced debt levels and composition in many countries </li></ul><ul><li>Politically more stable than in past decades </li></ul><ul><li>Africa is more integrated with the world economy and less dependent on traditional OECD markets </li></ul><ul><li>Governments’ efforts in nurturing private sector and enterprise resulted in steady improvements in business climate indicators </li></ul><ul><ul><ul><ul><ul><li>Total trade with China has increased tenfold in the past decade to reach USD 106 billion in 2008 </li></ul></ul></ul></ul></ul>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. 8. It’s time for Africa to tap its unexploited potential Beyond the Crisis <ul><li>AEO 09: Innovation and ICT </li></ul><ul><li>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 </li></ul><ul><li>ICTs foster human development allowing a better acces to basic services </li></ul><ul><li>ICTs in Africa represent a new innovation fronteer , combining existing technologies with innovative applications, suited to the local environment and constraints. </li></ul><ul><li>Domestic Markets : More attention should be given to fostering domestic investment and domestic demand </li></ul><ul><li>Regional Markets : Only 9.5% of total African trade is regional </li></ul><ul><li>Structural reforms are necessary to increase domestic resource mobilisation, overcome infrastructural hurdles and improve the business climate </li></ul>
    9. 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

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