Download Quality of Recent African Growth

NS4301
Quality of Recent
Sub-Saharan Growth
Summer Term, 2015
Overview
• IMF, “The Quality of Recent High-Growth Episode in SubSaharan Africa,” February 2013
• Explores the quality of recent high growth episode in
sub-Saharan Africa by asking:
• What has been the nature and pattern of SSA growth over the
past 15 years and how does it compare with previous episodes?
• Has this growth had an impact on socially desirable outcomes –
improvements in health, education and poverty indicators?
• To do this paper examines
• Various aspects of the fundamentals of growth in SSA – levels,
volatility, sources, according to various country and analytical
groupings
• Explores the extent to which the growth has been accompanied
by improvements in social indicators.
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Country Classifications
• Oil exporting countries:
• Angola, Cameroon, Chad, Republic of Congo, Gabon and
Nigeria
• Middle income countries:
• Botswana, Cape Verde, Lesotho, Mauritius, Namibia,
Seychelles, South Africa and Swaziland
• Low income countries:
• Benin, Burkina Faso, Ethiopia, Ghana, Kenya, Madagascar,
Malawi, Mali, Mozambique, Niger Rwanda Senegal, Tanzania,
Uganda and Zambia
• Fragile countries:
• Burundi, CAR, Comoros, DRC, Ivory Coast, Eritrea, Gambia,
Guinea, Guinea-Bissau, Liberia Sao tome, Sierra Leone, Togo,
Zimbabwe
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Strength of Growth I
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On average SSA countries have increased their average real GDP
and real GDP per capita growth since 1995
Pattern different depending on country and analytical groupings
Middle income countries’ average growth, although still strong,
declined somewhat during the period 1995-2008
Low-income countries registered a lackluster real GDP growth rate
from 1980 through 1994 with an average no higher than 2% per
year
• Since 1995 growth has improved tremendously to nearly 6 percent
per year on average
• This acceleration was also observed at per capita income levels
• Income per capita from 1980 through 1994 actually declined with a
growth rate of about -1.0%.
•
• From 1995 through 2008 it increased to a more promising 2.7% per
year
Although fragile countries exhibit promising positive real GDP
Growth rate since 1995, until 2004 their GDP per capita growth was4
negative.
Strength of Growth II
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Volatility of Growth I
• There has been a general decline in volatility of growth
during the high growth episode
• Volatility measured as the standard deviation of the real GDP
growth rate over a 5-year period has been declining since 1995
• However still fairly high for fragile countries until 2004
• Middle income countries record a consistent reduction in
volatility even before 1995
• Low income countries also exhibit a negative trend since 199094
• On average volatility remained unchanged until 1999
• However on average volatility in oil exporting countries
declined approximately 50 percent in 2005-08 compared
to the previous period.
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Volatility of Growth II
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Volatility of Growth III
Reasons for the decline in volatility
• Most of the fast growers have achieved
• Overall macroeconomic stability
• Stable and low inflation and debt sustainability
• Pursued sound economic policies and
• Promoted institutional reforms
• Aided by a favorable external environment these
countries also built up their external reserves
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Total Factor Productivity I
• There has been a sharp turnaround in total factor
productivity since the mid-1990s.
• Since 1995 all country groups have recorded TFP
improvements, unlike the previous period
• The turn around in fragile countries is particularly
remarkable given that they had negative TFP growth
before 1995
• From 1980 through 1994 the average annual change in TFP was
-0.5 percent
• However since 1995 there has been positive changes in TFP of
about 1.3 percent yearly
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Total Factor Productivity II
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Total Factor Productivity III
• Reasons given for the improvement in TFP
• Reduction of the distortion of the foreign exchange market (black
market premium)
• Structural changes (movement from agricultural to nonagricultural activity)
• Increasing exports
• Other reasons given – policies that involve
• Reducing population growth rate and debt
• Facilitating greater openness
• Sound macroeconomic fundamentals
• Achieving price stability and
• Creating financial deepening and greater private participation
• All linked to higher total factor productivity in SSA
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Sectoral Composition of Output I
• On average, in SSA the sectoral composition of growth
since 1995 has become more broad-based
• Still significant heterogeneity across different country
groups
• The IMF focuses on agriculture, industry and services
share of total real GDP growth
• From the period 1980-84 agricultural sector was the main driver
of growth on average for all countries in Africa
• Contributed about half of 2.2 percent of real GDP growth
• Relative importance of industry and services has grown since
1995
• On average from the total of the 5.1% real growth in real GDP in
2005-08 services and industry explain around 4.3%
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Sectoral Composition of Output II
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Sectoral Composition of Output III
Generalizations:
• The importance of agriculture to the growth of middle
income counters has steadily declined over time
• The contribution of services is increasing for the low
income countries
• Fragile countries were entirely dependent on agriculture
for the period 2000-04, but since then have had a more
balanced growth pattern
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Composition of Output: Demand I
Generalizations
• Since 1995 the relative importance of net exports has
broadly increased
• Although oil exporting countries boomed around 1995
they did not exhibit export led growth until the next
period 2000-04
• since the peak was mainly driven by gross investment (which
has been declining since)
• The role of net exports has been particularly important in
low income and fragile countries
• In fact low income countries’ growth in 1995-1999 driven
almost exclusively by net exports
• Growth in middle income countries seems to be less
export oriented than the other groups of countries.
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Composition of Output: Demand II
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Composition of Output: Demand III
• Observations
• Outward oriented growth has
• Been accompanied by a decrease in the volatility for almost all
groups of countries and
• A positive evolution of TFP
• The emergence of dynamic BRICs, notably China has had
a favorable impact on export growth and FDI in SSA
• These patterns are consistent with the empirical literature
that demonstrates outward orientation, especially if
accompanied by a diversification of the export base
reduces volatility and induces improvement in
productivity
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Socially Desirable Outcomes I
• Has the improvement in growth been accompanied by
improvement of social indicators?
• In principle, improvement of per capita growth should
increase the resources for social spending and increase
the incomes of the population.
• In practice, this may not happen for several reasons
• 1. While social spending may increase, the effectiveness may
not be there due to institutional weakness
• 2. A number of social indicators such as life expectancy and
infant mortality are “slow-moving” and are mainly driven by
exogenous factors such as medical advances and external aid
• 3. Increases in per capita income may not necessarily translate
into poverty reduction – may depend on income inequality and
the source of the GDP growth
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Socially Desirable Outcomes II
Overview of main findings
• 1. Improvements in real per capita income are associated
with
• the reduction in infant mortality and
• school enrollment at the secondary level
• however the link between the increase in the average per capita
income and primary school enrollment and life expectancy is
more tenuous
• 2. The evolution of social indicators in low income and
fragile countries is more correlated with changes in real
GDP per capita.
• 3. The biggest improvements are the result of postconflict recoveries and/or relatively strong political will
and institutional reforms.
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Socially Desirable Outcomes III
• Problems doing research on social outcomes
• The impact of growth on social indicators (except
perhaps poverty) is likely to be considerably lagged
• improving educational attainment requires additional
infrastructure and training of teachers
• need to investigate a longer horizon of time
• IMF averages the social indicators and growth rates over
periods of 15 years (1980-94 and 1995-2008)
• Then analyze the relationship between the change in
social indicators and the improved GDP per-capita over
time
• Finally, they identify the high performers which are
countries with increasing change of GDP per capita and
improving social indicators.
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Primary School Enrollment I
• Consistently, over time, indicators of school enrollment
have positively improved in low-income and fragile
countries
• Oil exporting and middle income countries have the highest level
of school enrollment in the region
• However low income and fragile countries catching up very
rapidly -- but from a very low level
• The first big improvement occurred during the period
1991-95 with an increase of the enrollment ratio of
• Over 110 percent for the low income countries
• 45% for fragile countries
• The second big expansion took place in the period 200105
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Primary School Enrollment II
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Secondary School Enrollment I
• Since 1980 secondary school enrollment has increased
from about 16 percent to 40 percent on average for all
SSA countries
• Still there are large inequalities
• Middle income countries have recorded the most significant
increases
• Oil exporters have recorded almost no increases
• Progress has been more steady for low-income and fragile
countries
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Secondary School Enrollment II
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Life Expectancy I
• Life expectancy at birth in SSA has barely improved over
the past 50 years
• Largely due to HIV/AIDS especially in middle-income
countries and prevalence of other diseases such as
malaria and tuberculosis
• For some countries, life expectancy has even declined
from 1980 until the end of the 1990s
• During the period from 1990-94 life expectancy in low
income countries fell almost 5% in comparison to the
previous period
• Middle income countries also recorded a 3% reduction
during 1995-99 and even worse in 2000-04 when a drop of
almost 6% was observed
• There has been a turnaround during 2000-04. During
2005-08 the average live expectancy in SSA increased
about 3% with respect to the previous period, especially 25
in the low income countries
Life Expectancy II
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Infant Mortality Rates I
• Main Patterns
• Infant mortality has been decreasing on average since
1980 in all SSA countries
• The decline has been particularly remarkable in middle
income countries
• Even low and fragile countries have shown improvement
• The improvement seems to have somewhat accelerated
since 1995
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Infant Mortality Rates Ii
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Poverty Reduction I
• Readily available poverty indicators – people living on a
dollar a day or less – generally have shown modest
improvements over the past 15 years
• There seems to have been significant improvements in
oil-exporting and middle income countries
• Progress seems apparently slow in low income and
fragile countries
• Problem – official statistics often grossly underestimate
the reduction in poverty:
• Poor, infrequent, and inconsistent measurements
• With some advanced statistical methods picture is that:
• Poverty falling much faster than commonly believed
• Inequality and welfare may also be improving much more rapidly
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than official estimates
Poverty Reduction II
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Links: Growth and Social Indicators I
• Finally the IMF looks more formally at the extent to which
growth dynamics in SSA have been correlated with
improvement in social indicators
• To do this they compare correlations between changes in
the level of a particular social indicator and GDP per
capita growth
• Results show that for the most part little correlation
between growth and social indicators
• Over the longer run the only indicator that shows as significant
correlation for the entire sample is secondary school enrollment
• At the analytical group level
• Fairly strong and statistically significant correlation between life
expectancy and growth
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Links: Growth and Social Indicators II
• At the analytical group level
• Fairly strong and statistically significant correlation between life
expectancy and growth in fragile states
• In the earlier period (1984-89) there were some significant
correlations between growth and some social indicators,
especially school enrollment
• Number of plausible reasons why results disappointing:
• Poor data – always a factor
• As noted earlier social indicators especially life expectancy and
mortality tend to move slowly while epidemic like AIDS can
quickly set back progress
• Growth is but an ingredient in the dynamics – while in principle
growth should increase the amount of available resources for
social improvement, success hinges critically on a complex
interaction of many institutional and policy factors
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Links: Growth and Social Indicators III
• While health outcomes show a low correlation with
income
• Link is far from uniform across analytical grouping.
• Several of the low-income and fragile African countries
exhibit better health outcomes compared to countries
with much higher income levels
• Does not seem that health expenditure, either as a
percentage of GDP or per capita, is a particularly good
predictor of health outcomes
• Life expectancy outcomes more related to
• Food availability per capita
• Literacy rate and
• A decrease in alcohol consumption in SSA
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Links: Growth and Social Indicators IV
• Health expenditures have shown strong negative
relationship with life expectancy probably arising from:
• Inefficient health services provision systems, as well as
• The HIV/AIDS epidemic
• Infant mortality indicators likely to be more correlated
with
• Mother’s schooling
• Mother’s age at child’s birth
• The mother’s vaccination and
• Access to infrastructure
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Summing Up
• Appears that the most successful countries in achieving
improved social outcomes have:
• Consistent leadership committed over an extended time period
backed by strong implementation and human capacity; and
• Long-term institutional reforms, especially those making the
public sector more accountable to citizens
• Listing of countries with the best performance in terms of
improvement in social indicators --
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Best Performers I
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Best Performers II
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