African Economic Outlook (AEO) Mulls Africa's Resilience to Global Crisis

22 June 2010
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African Development Bank (Abidjan)
press release

The 2010 edtion of the "African Economic Outlook" which highlights the continent's resilience to the global financial and economic crisis, is attracting greater attention among researchers and development partners. By showing that Africa has weathered the crisis better than other regions of the world; the flagship publication has elicited considerable interest since its launch in May 2010 at the Annual Meetings of the African Development Bank (AfDB) in Abidjan, Cote d'Ivoire.

Jointly published by the AfDB, OECD and the UN Economic Commission for Africa (UNECA), the publication is currently being disseminated worldwide , with a series of conferences in Africa, Europe, America and soon in the Middle East and Asia.

"The African economy has been more resilient to the global crisis than other emerging economies, with the exception of those in Asia, notably China and India,"it says, noting:"The effect of the crisis, although less severe than on most other continents, was nonetheless significant".

The report says although in the three years before the 2009 global recession Africa had achieved an average annual growth of around 6%, in 2009 the growth rate was slashed by 3.5 percentage points to 2.5%; actual growth in Africa was almost exactly what had been predicted in last year's African Economic Outlook (2.3%).

It says the economic meltdown was most pronounced in the mining and manufacturing sectors, which recorded negative growth in many countries. "These sectors were particularly exposed to the fall of commodity prices and global trade."

The other sectors, notably agriculture and services, were more resilient and mitigated the economic downturn. In fact, in most African countries agricultural sectors benefited from good harvests thanks to favourable weather conditions. "Domestic services including real estate and telecommunications (notably mobile telephony) were generally resilient to the crisis and continued to contribute to growth," the report says.

Anchored on the theme: "Public Resource Mobilization and Aid", the report points out that tax revenues on the African continent were positive. The average African tax revenue as a share of GDP has been increasing since the early 1990s. African countries generally collect tax revenues in the same way as countries at similar stages of development on other continents, it says.

However, this positive trend has been mostly driven by resource-related tax revenues, that typically distract governments from generating revenue from more politically demanding forms of taxation such as corporate income taxes on other industries, personal income taxes, Value Added Taxes (VAT) and excise taxes.

By contrast, countries without large natural resource endowments have made relatively more significant efforts in improving the quality and balance of their tax mix.

It says that non-resource related tax revenues had stagnated at best, while trade taxes had declined as a result of trade liberalisation. Corporate income taxes were reported to have been resilient, despite decreases in rates at which profits were taxed across Africa, and increases in the number and type of exemption granted by African countries to investors.

In order to improve tax revenues in Africa, the "African Economic Outlook" says "tax reform will bring long-term results only if it is visibly linked to a growth strategy." "Improving tax collection must be accompanied by a general discussion about governance, transparency and the eventual use of increased public resources by the government," says the report.

"Administrative bottlenecks are such that in the short run, deepening the current tax base is the only effective policy option. In particular, countries should consider retrenching tax preferences and negotiating fairer and more transparent concessions with multinational enterprises," the report says.

AfDB and OCED economists are on the move to launch the report in the following cities: Abidjan, Berlin, London, Nairobi, Tunis, Pretoria, Paris, Rabat, Washington, New York and Dakar. In the second half of 2010, the report's dissemination is expected to take place in Addis Ababa, Geneva, Roma, Brussels, Luanda, Maputo, Bilbao, Dubai, Lisbon, Abuja, Yaounde, Tripoli, Ouagadougou, Shanghai and Beijing.

Contacts

Felix Njoku

Read the original article on African Development Bank (AfDB).

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