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2006:SADC Macroeconomic Convergence Programme
 

2006:SADC Macroeconomic Convergence Programme

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    2006:SADC Macroeconomic Convergence Programme 2006:SADC Macroeconomic Convergence Programme Document Transcript

    • Deepening Integration in SADC: Macroeconomic Convergence Issues for Botswana July 2006 Keith JefferisStructure of Presentation Botswana Convergence Results in Regional Context Botswana Recommendations Impact of Regional Integration on Botswana SADC Macro Convergence Programme Issues 1
    • Baseline Study for SADC Macroeconomic Convergence Programme Under FIP: Overview of Preliminary ResultsPrimary MacroeconomicConvergence Indicators Year 2008 2012 2018Inflation <9.5% <5% <3%Deficit/GDP >5% >3% >1%Debt/GDP <60% <60% <60%Current <9% <9% <3%Ac/GDP 2
    • Secondary Macroeconomic Convergence Indicators Year 2008 2012 2018 Econ growth 7% 7% 7% FX res (imp. 3 6 6 cover, m) CB cred to 10% 5% 5% gov (% rev) Dom. S (% 25% 30% 35% GDP) Dom. I (% 30% 30% 30% GDP)Inflation 20% 18% SADC target 16% 14% 12% 10% 8% 6% 4% 2% 0% Les Les Zam Zam Moz Moz Bots Bots Mal Mal Nam Nam 04 07 04 07 04 07 04 07 04 07 04 07 3
    • % of GDP % of GDP -10% -8% -6% -4% -2% 0% 2% 4% 6% -25% -20% -15% -10% -5% 0% 5% Le Le s s 04 04 Le Le s s 07 07 grants) grants) Za Za m m 0 0 Za 4 Za 4 m m 07 07 M M oz oz 04 04 M M oz oz 07 07 Bo Bo ts ts 0 0 Bo 4 Bo 4 ts ts 07 07 SADC target SADC target Budget balance (incl. M M Budget balance (excl. al al 04 04 M M al al 07 07 N N am am 04 04 N N am am 07 074
    • % GDP % of GDP -25% -20% -15% -10% -5% 0% 5% 10% 15% Le 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% s Le s 200% 04 04 Le Le s s 07 07 Za Za m m 0 0 Za 4 Za 4 m m 07 07 Public Debt M M oz oz 04 04 M M oz oz 07 07 Bo Bo ts ts 0 0 Bo 4 Bo 4 ts ts 07 07 SADC target SADC target M M al al 04 04 M M al Current Account of BoP al 07 07 N N am am 04 04 N N am am 07 075
    • GDP growth 8% 7% 6% 5%% of GDP SADC target 4% 3% 2% 1% 0% 04 07 04 07 04 07 Za 4 07 Bo 4 07 04 07 0 0 al al am am oz oz m m ts ts s s Le Le M M Za Bo M M N N Country Responses Considerable variation: – Degree of integration of SADC convergence programme into policy framework – Degree of attention devoted to convergence issues – Openness to discussion of difficult / critical issues – Willingness to question aspects of SADC convergence programme 6
    • Country Responses Considerable variation: – Availability of macroeconomic data, especially for official forecasts – Availability of independent reports / commentary / analysis – Capacity to continue convergence monitoringBotswana Findings Botswana’s convergence performance good, due to long-term economic record No major macroeconomic imbalances Will meet primary convergence targets BUT - concerns about long-term growth prospects Several worrying findings 7
    • Botswana weaknesses Poor quality of macro data in some areas Lack of updated, publicly available macro forecasts/projections Sensitivity to (constructive) critical comment – major contrast with IMF programme countries Botswana Recommendations 8
    • Key Economic Challenges Boosting investment and long-term economic growth Reducing poverty & unemployment Managing impact of HIV/AIDS Ensuring fiscal sustainability Promoting economic diversification Facilitating new sources of exportsKey Constraints Real exchange rate - overvalued Inflation & interest rates – too high Impact of HIV/AIDS – growth, fiscal Productivity – too low High costs of doing business – Unavoidable (location, water) – Manageable (bureaucracy) Complacency/slow policy implementation 9
    • Policy Recommendations All govt. policies to focus more on efficiency, productivity and competitiveness Improve economic flexibility and adaptability Inflation a key problem – linked to productivity Resolve exchange rate and monetary policy conflicts (active MP and pegged XR) Strengthen trade policy formulationPolicy Recommendations Resolve FIAS, WBDB issues – Business licensing, Land – Skills & Recruitment, Work permits Speed up deregulation and privatisation Improve trade policy coherence – Trade facilitation – Liberalisation vs. protectionism – Use SACU to promote interests 10
    • Impact of Regional IntegrationImpact & Relevance ofRegional Integration Trade growth important for Botswana But smaller SACU members will not be main beneficiaries of SADC trade integration Botswana’s main gains from: – Liberalisation of trade in services (non-SACU) (non- – Trade facilitation, NTBs, administrative barriers NTBs, – Reduction of SACU tariffs vs. region and RoW 11
    • Implications of Long-termRegional Integration Plans SADC Customs Union – Revenue distribution, compensation – Expand SACU? SADC Common Market – Labour mobility? SADC Monetary Union – too big and dissimilar? – XR and monetary policy implications – expand CMA? Outstanding Issues –SADC Macro Convergence Programme 12
    • Questions and Problems Purpose of convergence programme / indicators? – SADC FIP, but beyond that? – monetary union requires convergence, but not general regional economic integration; – can provide useful regional peer review mechanism (alt to IMF/WB), but what sanction? – indicators seen as “imported” (Maastricht), need imported” further thought and refinementQuestions and Problems General regional economic integration requires macroeconomic stability: – supports higher growth – reduces regional risk and uncertainty, boosts investment flows – will lead to passive convergence – but other constraints to intra-regional trade intra- (NTBs, slow liberalisation) more of a problem NTBs, Slow progress on FTA undermines credibility of broader integration, along with overlapping RIAs 13
    • Questions and Problems Strict, active convergence not needed for general economic (trade etc.) integration Only needed for monetary union, but this is far distant; Both timetable and MU process lack credibility; not on policy radar screen Monetary union needs further analysis on desirability, feasibility and timetable If pursued, needs policy convergence (exchange rate & monetary policy) as well as indicator convergence Thank You 14