Extracts relating to Africa from the United Nations report, World Economic Situation and Prospects 2007, produced by the UN's Department of Economic and Social Affairs, the United Nations Conference on Trade and Development and the five United Nations regional commissions.
The strong performance of the world economy in 2006 was remarkably broad-based. During 2006, 92 out of a total of 159 countries for which recent data are available succeeded in increasing per capita output by 3 per cent or more (see table I.2). This group of strong performers includes 60 developing countries, and the trend could signal further progress in poverty reduction. At the same time, the number of countries that registered a decline in gross domestic product (GDP) per capita fell to only seven, less than in previous years. Nonetheless, the same table shows that there are still 47 developing countries which did not manage to reach a growth rate of 3 per cent in GDP per capita. This group includes a large number of African countries, suggesting that economic development in these countries falls short of what would be needed to achieve the internationally agreed poverty reduction goals. In the outlook for 2007, as the world economy moderates, the number of countries that will stay above the 3 per cent benchmark is expected to decline somewhat.... (p5)
Among developing countries, growth in Africa has maintained a strong pace, reaching almost 5.6 per cent in 2006. Many countries in Africa have sustained a relatively strong recovery since 2003, driven by increasing hydrocarbon export earnings, vibrant global demand for, and favourable international prices of, some non-oil commodities, vigorous domestic demand, and markedly growing FDI flows and donor support. This contrasts with a much poorer performance in the African countries suffering from protracted civil unrest and political disturbances, adverse weather conditions and/or decreased tourism revenues. The region's GDP is expected to expand by 5.6 per cent in 2007.... (p9)
Despite a robust GDP growth in the developing countries, growth of employment has not been sufficient to substantially lower unemployment rates. The economic revival in Africa is being driven mainly by capital-intensive sectors, such as the oil and mining sectors, which have only minor backward and forward linkages with the rest of the economy, thus limiting the impact for reducing high rates of unemployment and underemployment. As growth prospects improve, labour participation has increased in some African and Latin American countries, limiting the drop in unemployment rates....(p14)
Inflation has remained stable in most developing countries and economies in transition. A number of these economies have experienced higher rates of inflation during 2006, but in most cases this was mainly due to the direct effects of higher oil prices, with only limited second-round effects. Several economies only have encountered significant inflation pressures, caused by country-specific factors. In Africa, inflation for the region increased slightly in 2006, but remains low on average. In a few African countries, however, there were sharp increases in consumer prices as a consequence of food shortages, currency depreciation and/or an immediate pass-through of higher imported-oil prices to consumers....(p15)
Import demand in volume in most developing economies and the economies in transition has accelerated during 2006, owing to a sustained economic growth in these economies, as well as a continued improvement in the terms of trade for a large number of economies. Real import demand in the oil-exporting and mineral- and metal-exporting economies in Africa, Latin America and Western Asia has been growing at double digits, driven by strong consumption demand and demand for new production capacity and infrastructure....(p36)
The volume of African exports continues to expand in 2006, albeit at a lower pace than in 2005. This deceleration reflects, to a large degree, the decline or slow growth of oil production in Chad, Equatorial Guinea, Gabon and Nigeria, and a weak manufacturing export growth in South Africa. In the outlook, the growth of real exports is expected to remain robust in 2007, with an increase in hydrocarbon production in Algeria, Angola and Mauritania, the start of operations at new mines in Ghana, Mali and Namibia, and the resumption of timber and rubber exports in Liberia....(p38)
Africa: the growth momentum continues (p102-108)
Africa's GDP has expanded by 5.6 per cent in 2006, continuing the momentum of strong growth achieved over the previous three years (see figure IV.8). This record represents a major turnaround from the previous decades of economic stagnation.
Despite the strong recovery observed on the continent, in most countries, growth rates remain insufficient to achieve development goals. Growth is highly concentrated in a narrow range of activities, making many African economies extremely vulnerable to exogenous factors such as weather conditions, terms of trade developments and aid flows. As a result, most African countries have been unable to sustain sufficiently high growth rates over the medium term. From 1998 to 2006, only 7 countries out of the 52 countries monitored by the Economic Commission for Africa (ECA) achieved an average real GDP growth rate of more than 7 per cent, considered by some approaches as the minimum growth rate required to halve extreme poverty in the region by 2015. By this measure, and at current trends, few countries would be on track to achieve the Millennium Development Goals (MDGs) by 2015 (see figure IV.9). Hence, the continent faces the dual challenge of further increasing growth rates and sustaining these rates over an extended period. This will require, next to enhanced expenditures for human development, sustained improvements in domestic investment climate to promote private-sector activity, improved provision of infrastructure (see box IV.2), measures to minimize the adverse impact of external shocks on incomes of the poor and, most importantly, progress in the diversification of production and exports.
Africa is expected to grow at a rate of 5.6 per cent in 2007, the same pace as 2006, as public consumption gathers speed, investment for the expansion of productive capacities and infrastructure development continues, and new mines and oil fields come on stream in many countries (see table A.3).
Growth is uneven across countries and subregions, with oil-exporting countries growing much faster than oil-importing countries. In North Africa, economic activity rebounded very strongly, jumping from 5.0 per cent in 2005 to 6.1 per cent in 2006. The return to normal agricultural output levels and continued strong activity in services Contributed to strong economic recovery in Morocco and Tunisia, while oil exporters such as Algeria and the Libyan Arab Jamahiriya benefited from higher export revenues and buoyant public consumption and investment. The Egyptian economy grew more vigorously in 2006, attributable to robust domestic demand and increasing receipts from tourism and the Suez Canal. The same factors are expected to maintain the growth momentum in 2007.
Economic growth in sub-Saharan Africa, excluding Nigeria and South Africa, has reached 5.9 per cent in 2006. Growth of the majority of the economies in the region has clustered in the range of 3 to 7 per cent. South Africa's GDP growth, although still relatively robust, has decelerated slightly in 2006, reflecting a slow expansion in the agricultural sector and weak export growth. Growth of the Nigerian economy has moderated to 5.1 percent in 2006, down from the 6.9 per cent recorded in 2005, owing mainly to a decline in oil production. GDP is expected to accelerate to 6.0 per cent in 2007, driven by increased FDI, particularly in the hydrocarbon sector, continued expansion of agricultural production and increasing investment in infrastructure development.
A smaller number of sub-Saharan countries have expanded by more than 7 percent in 2006, and these are expected to maintain very similar growth levels in 2007. Most of the oil-exporting countries, such as Angola and the Sudan recorded double-digit GDP growth rates, reflecting the continued strength in oil-export revenues and robust public spending. Growth was also particularly strong in the Democratic Republic of the Congo, Liberia, Mozambique and Sierra Leone, where stronger metal prices and post-conflict reconstruction activities lent strong support to GDP expansion.
Continued political tensions in Côte d'Ivoire and Zimbabwe, and the decline in tourism receipts and export earnings in the Comoros and Seychelles stalled growth in these economies in 2006.
The recent strong GDP growth has not been accompanied by commensurate job creation, raising serious concerns about the continent's ability to reduce poverty. South Africa is a case in point, where an impressive growth performance in recent years has not translated into visible reductions in un- and underemployment rates. This pattern of apparent jobless growth can be explained by myriad factors across countries. First, in many countries, growth rates have not been strong or sustainable enough to generate sufficient labour demand for the increasing labour force. Second, the high volatility of GDP growth increases uncertainty regarding future profitability, ultimately hampering private-sector job creation. Third, economic activity has shifted away from agriculture into more capital- intensive sectors, such as mining and oil production. This diversification of economic activity away from agriculture has been accompanied by little or no increase in productivity in the agricultural sector and very low absorption of labour into the non-agricultural sector, resulting in high underemployment in the rural and agricultural sector. Fourth, in most African countries, employment objectives are not well integrated into macroeconomic policy frameworks as an explicit goal of macroeconomic policy. Most, if not exclusive, importance is given to much more narrowly defined policy goals of macroeconomic stabilization, focusing on controlling inflation and reducing budget deficits.
The fiscal policy stance in the African region has been relatively expansionary in 2006. In Algeria, the implementation of the Growth Consolidation Plan, an ambitious public investment programme, and the increase in public-service wages led to a significant growth in public spending. Likewise, South Africa is currently devising the Accelerated and Shared Growth Initiative for South Africa (ASGI-SA), which aims to achieve higher sustained economic growth, significantly reduce unemployment and poverty and tackle other pressing social problems. The Government has already increased spending in essential services such as power generation and distribution, rail transport, housing and the construction of oil pipelines.
Although public expenditures, and in particular capital expenditures, rose, fiscal positions recorded surpluses or moderate deficits in many countries, reflecting improved domestic revenue collection and significant current grants. However, in many oil-importing countries, such as the Central African Republic, Eritrea, Guinea, Guinea-Bissau and Zimbabwe, the lack of any significant increase in domestic government revenues and limited access to external financing, coupled with rising oil prices, has left fiscal positions fragile.
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On average, monetary policies have been cautious. Private-sector credit as a share of broad money has declined slightly in some countries, suggesting a tightening of monetary policy to counter the expansionary fiscal stance. Many oil-producing countries also implemented a variety of measures aimed at controlling the rapidly increasing liquidity in banking systems. These measures included mopping up excess liquidity through openmarket operations, transferring oil receipts from commercial banks to the central bank and increasing reserve requirements on demand deposits.
Despite the region's relatively low inflation, Eritrea, Guinea, Kenya, Sao Tome and Principe and Zimbabwe experienced sharp increases in consumer prices due to a variety of country-specific developments, including food shortages, currency depreciation and increased domestic prices of petroleum products.
Many countries, especially the oil-producing countries, have continued to post increasing trade-balance and current-account surpluses. The observed improvements, however, mask the persistent marginalization of the African continent in the global economy. Africa's share in world exports remains small and has declined systematically over the past few decades. This is a result of the concentration of African exports in a few commodities (low diversification), slow growth and lack of competitiveness in the manufacturing sector and deterioration of the terms of trade.
Africa's external debt eased in 2006 as the result of continued debt relief, stronger export revenues and more prudent debt management. However, this situation is partially influenced by improvements in the largest economies, especially oil exporters such as Nigeria and Algeria. In many other African countries, expenditures on debt servicing continues to outstrip those of social services such as education and health, undermining the continent's growth prospects and limiting its ability to invest in social service delivery to meet the rising demand.
The outlook is positive, but subject to a number of political and economic downside risks. The presidential elections scheduled in a number of countries, including Nigeria and Kenya, in 2007 might increase political uncertainties, have a negative effect on the policy environment and have an impact on economic stability. Continued political tensions and/ or civil unrest in Chad, Côte d'Ivoire, the Democratic Republic of the Congo and the Darfur region of the Sudan could have spillover effects on neighbouring countries, weakening their growth prospects. Finally, a worse-than-expected slowdown in the rest of the world could significantly hamper the region's prospects, as exports remain a key engine of growth in the continent. (p102-108)
The full report: World Economic Situation and Prospects 2007 [PDF]
