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This presentation is part of a blog post featured in the blog Africa Can located here: …

This presentation is part of a blog post featured in the blog Africa Can located here:
https://blogs.worldbank.org/africacan/

Published in: Education, Business, Technology

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  • Before the crisis, private capital flows to Africa had been rising—faster than in any other region—to $53 billion, more than official development assistance. These flows had created expectations that Africa had “turned the corner”. Politicians like Ellen Johnston Sirleaf were claiming that these flows were evidence that their policy reforms were working (and they were right).When the crisis hit, these flows contracted to about $30 billion. South Africa alone saw equity and bond issues go from $20 billion in 2007 to $4 billion. Ghana and Kenya canceled sovereign bond offerings worth $500 million.
  • Remittances too had been increasing rapidly, to a peak of $20 billion in 2007. But 75 percent of Africa’s remittances come from the U.S. and Western Europe, the epicenter of the crisis. Also, we are used to thinking of remittances as countercyclical—when your family is doing badly, you send them more money. This time, the crisis started in remittance-sending countries.As a consequence, remittances are expected to decline by about 13 percent in 2009.
  • This is a double-edged sword, as those who were hurt the most by the commodity price boom are the ones most helped now, and vice-versa.
  • Finally, there is a question about whether foreign aid will decrease. The major bilateral donors have committed to maintaining their GDP shares of aid, but since GDP is falling (and in some cases their currencies are devaluing), the dollar value is likely to decline. The experience of previous financial crisis—in Nordic countries—is sobering.
  • Transcript

    • 1. Africa: Enhancing growth and reducing poverty in a volatile world
      ShantaDevarajan
      World Bank
      http://blogs.worldbank.org/africacan
    • 2. Before the global crisis
      Africa was experiencing sustained, relatively rapid economic growth
      As fast as all developing countries (except China and India)
    • 3. For the first time in 20 years, Africa’s growth is equal to that of developing countries (except China and India)
    • 4. Before the global crisis
      Africa was experiencing sustained, relatively rapid economic growth
      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
    • 5. Source: World Development Indicators, World Bank
    • 6. Before the global crisis
      Africa was experiencing sustained, relatively rapid economic growth
      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
    • 7. 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
    • 8. Although least integrated, Africa may be the worst hit by the crisis
      Private capital flows
    • 9. Source: IMF, World Economic Outlook, 2008
    • 10. If FDI flows, more important recently, were to fall, growth would suffer
      Source: World Bank, Global Economic Prospects 2010: Crisis, finance, and growth
    • 11. Although least integrated, Africa may be the worst hit by the crisis
      Private capital flows
      Remittances
    • 12. Remittances
      Source: Ratha and Mahopatra (2009)
    • 13. Although least integrated, Africa may be the worst hit by the crisis
      Private capital flows
      Remittances
      Tourism
    • 14. Tourist arrivals(compared with equivalent period in 2008)
      Source: World Bank staff estimates
    • 15. Although least integrated, Africa may be the worst hit by the crisis
      Private capital flows
      Remittances
      Tourism
      Primary commodity prices
    • 16. Terms of trade shocks(change in trade balance as percentage of 2006 GDP)
    • 17. Note: 2008 includes 2008/09 fiscal year; 2009 includes 2009/10 fiscal year
      Source: Regional Economic Outlook, IMF (October 2009)
    • 18. Although least integrated, Africa may be the worst hit by the crisis
      Private capital flows
      Remittances
      Tourism
      Primary commodity prices
      Foreign aid
    • 19. Foreign aid?
      Source: David Roodman, Center for Global Development
    • 20. Impact: Decline in growth
      Source: African Economic Outlook database
    • 21. 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
    • 22. 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
    • 23. 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
    • 24. 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
    • 25. Africa’s medium-term challenges
    • 26. Business climate
    • 27. Low competitiveness
      Source: World Bank, Doing Business Database
    • 28. 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
    • 29. Youth unemployment
    • 30. Lagging agricultural productivity
    • 31. 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.
    • 32. 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
    • 33. GEOGRAPHICAL SCOPE OF THE STUDY
      SELECTED CORRIDORS
      OF THE STUDY
    • 34. 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
    • 35. 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
    • 36. Example of the impact of market deregulation:
      the case of Rwanda
      Average transport prices (constant and current) from Mombasa to Kigali
    • 37. 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