WTO Seminar

Africa: Enhancing growth and reducing poverty in a volatile world
ShantaDevarajan
World Bank
http://blogs.worldbank.org/africacan

Before the global crisis
Africa was experiencing sustained, relatively rapid economic growth
As fast as all developing countries (except China and India)

For the first time in 20 years, Africa’s growth is equal to that of developing countries (except China and India)

As fast as all developing countries (except China and India)
Broad-based: 22 non-oil countries had 4+ percent average GDP growth from 1998-2008

Source: World Development Indicators, World Bank

Broad-based: 22 non-oil countries had 4+ percent average GDP growth from 1998-2008
Due to
Higher commodity prices
Increases in aid, debt relief and capital flows
Improved macroeconomic policies

Inflation in Africa
140
45
2
2
2
40
3
4
5
120
6
6
6
7
7
35
13
13
Inflation>20%
100
30
10%<inflation<=20%
80
25
Number of Countries
Average Inflation Rate %
Inflation<=10%
20
60
33
33
33
32
31
31
31
Median inflation rate
30
15
29
28
27
40
24
10
17
20
5
0
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007

Although least integrated, Africa may be the worst hit by the crisis
Private capital flows

Source: IMF, World Economic Outlook, 2008

If FDI flows, more important recently, were to fall, growth would suffer
Source: World Bank, Global Economic Prospects 2010: Crisis, finance, and growth

Remittances

Remittances
Source: Ratha and Mahopatra (2009)

Remittances
Tourism

Tourist arrivals(compared with equivalent period in 2008)
Source: World Bank staff estimates

Remittances
Tourism
Primary commodity prices

Terms of trade shocks(change in trade balance as percentage of 2006 GDP)

Note: 2008 includes 2008/09 fiscal year; 2009 includes 2009/10 fiscal year
Source: Regional Economic Outlook, IMF (October 2009)

Remittances
Tourism
Primary commodity prices
Foreign aid

Foreign aid?
Source: David Roodman, Center for Global Development

Impact: Decline in growth
Source: African Economic Outlook database

Result: Growth declines
Per capita income declines
For the first time in a decade
Human crisis
7-10 million thrown into poverty
30-50,000 additional children dying before their first birthday
Possible reversals in economic reforms—didn’t happen

Revenue, Expenditure and Deficit (relative to earlier projections)
Source: Krumm, Dhar and Choi, “Fiscal Response to the Global Crisis in
Low Income African Countries”, August 2009

Policy responses
Time-bound bailout programs
E.g., Tanzania’s emergency rescue program limits government guarantees and loans to two years
Accelerated reform programs
E.g., Nigeria is deregulating its downstream petroleum sector, reducing costly and regressive subsidies

Implications
Policy environment has never been better
External resources are as productive as they have ever been
Continued reforms and additional resources could accelerate progress towards the Millennium Development Goals

Africa’s medium-term challenges

Business climate

Low competitiveness
Source: World Bank, Doing Business Database

Infrastructure deficit
Note: Road density is in kilometers per kilometer squared; telephone density is in lines per thousand population; generation capacity is in megawatts per million population; electricity, water and sanitation coverage are in percentage of population

Youth unemployment

Lagging agricultural productivity

Climate Risks and Development: The “Poor Countries’ Danger”
Potential Impact of Climate Change on Agriculture:
Projected Percentage Change in Agricultural Productivity in 2080
Note: Scenario: SRES A2.
Source: Cline 2007.

Back to Infrastructure deficit
Note: Road density is in kilometers per kilometer squared; telephone density is in lines per thousand population; generation capacity is in megawatts per million population; electricity, water and sanitation coverage are in percentage of population

GEOGRAPHICAL SCOPE OF THE STUDY
SELECTED CORRIDORS
OF THE STUDY

THE TRANSPORT PARADOX IN AFRICA (1)
A disconnect between low transport costs but high transport prices
Transport costs are not excessively high in Africa comparing to France for example
However, average transport prices in Africa are high in a global comparison

THE TRANSPORT PARADOX IN AFRICA (2)
Although low efficiency, profit margins of trucking companies are high
An interesting observation:
On Central Africa corridor, trucks with lower average yearly mileage
have the higher profit margins

Example of the impact of market deregulation:
the case of Rwanda
Average transport prices (constant and current) from Mombasa to Kigali

Africa’s time
Before the crisis, policies were steadily improving and showing results
During the crisis, policies continued to improve
Policy environment has never been better
Medium-term challenges, while daunting, can also be met with a combination of resources and reform
Africa may be poised for sustained, rapid growth, as India was 20 years ago, and China 30 years ago

WTO Seminar

by The World Bank on Feb 16, 2010

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WTO Seminar — Presentation Transcript