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Economic and Social Conditions in Africa ECA Presentation to the Committee of Experts 29-30 May 2003 Addis Ababa Overview Economic growth in 2002 Trade---commodity prices Finance---ODA, FDI HIV/AIDS Poverty Medium-term Outlook African economic performance was below expectations 5 .8 6.0 AFRICA North Africa 5.0 Sub-Saharan Africa 4 .3 3 .7 4.0 3 .2 3 .4 3 .3 3 .2 2 .8 2 .8 3.0 2.0 1.0 0.0 2001 2002f 2002 Distribution of GDP growth rates of Africa, 1998-2003 (Number of countries) Range 1998 1999 2000 2001 2002 Negative growth rate 2 0 1 5 5 Zero & Positive growth rate 51 53 52 48 48 a) Low (0-3.9%) 23 26 37 19 27 b) Medium (4.0%-7.0%) 26 23 14 24 16 c) High (>7.0%) 2 4 1 5 5 Real GDP growth rates, the top 10 and the bottom 5 African countries, 2002 (%) Equatorial Guinea 24.4 Mozambique 12.3 Angola 12.1 Chad 11.0 Rwanda 9.9 Uganda 6.2 Ethiopia 6.1 Cape Verde 5.8 Benin 5.7 Mauritania 5.5 AFRICA 3.2 Gabon -0.3 Guinea-Bissau -1.4 Malawi -1.6 Madagascar Zimbabwe -12.0 -3.5 -8.9 -7.0 -2.0 3.0 8.0 13.0 18.0 23.0 Unfavorable weather stunted agriculture In Kenya flooding affected 30,000 people. In Northern Senegal flooding killed 500,000 livestock, destroyed 20,000 homes, and damaged 2,500 hectares of crops. Algeria agricultural output fell by 3.2% in 2002, partly because of flooding in the east in July and August. Tunisia’s agricultural output declined by 14% Botswana, Ethiopia, Lesotho, Malawi, Mauritania, Namibia, Niger, Swaziland, Tunisia, Zambia, and Zimbabwe suffered severe Despite heterogeneous conditions performance was generally even Real GDP Growth, S ub-regions of Africa, 2002 4.0 C e ntral Africa 3.6 East Africa 3.3 Southe rn Africa AFRIC A 3.2 W e st Africa 3.1 2.8 North Africa 0.0 1.5 3.0 4.5 Largest economies--mixed performance South Africa grew by 3.5% up from 2% ---driven by higher precious metal prices, strong tourism receipts and domestic demand Nigeria contracted by 3% amid oil cutbacks, political uncertainty and excessive government spending that pushed up inflation Largest economies—mixed (contd.) GDP growth in Algeria was weak at 1.9% down from 3% in 2001. GDP dominated by investments in oil sector but constrained by OPEC quota Inflation spiralled upwards and current account worsened to 14% from 8 % in 2001 high youth unemployment and the pace of reforms clouded the outlook. Regional Inflation in check… CPI inflation fell to 7.8% down from 15% in 2001 reflecting increased fiscal discipline across the region However, inflationary pressures remain a concern in Angola, Nigeria, Zambia and Zimbabwe But the external account worsened Regional current account deficit increased to 2% of GDP Due to a decline in the surpluses of Nigeria and Algeria This was offset in part by a current account surplus in South Africa as a result of higher prices for gold and other precious metals …amid heightened global uncertainty U.S. economy slowed appreciably in Q2 In Q3 despite volatile downward spiral in equity prices, consumer and business sentiment deteriorated as new orders for goods and services stagnated U.S. recovery pauses …growth in Europe remained weak Is this a double dip slowdown? 5 5 4 4 Unite d S ta te s 3 2 F ra nc e 3 C a na da Ita ly 2 2 001 Euro A re a U.K. 1 1 OEC D Ge rm a ny 2 002 0 0 2000 2001 2000 G7 2 0 0 2 -1 -1 -2 -2 J a pa n -3 -3 -4 -4 2001 2002 World Trade In H1 world trade was slowly recovering from its worst growth performance in two decades Oil prices rose markedly—topping USD 35 at end of 2002 fuelled by war fears Gold was also up by 17% to USD 320/oz Coffee was recovering from its lows thanks to expectations of a lower Brazilian crop. Intra-African trade is low Intra-Africa trade accounts for only 12% of Sub-Saharan exports, up 8% from 1989. Five countries dominate Intra-African trade— Côte d’Ivoire, Nigeria, Kenya, Zimbabwe, and Ghana. Very little or no trade occurs between countries that are geographically distant, such as Nigeria and Tanzania. Aid—Pledges increase European union ---all members should meet or exceed the EU average of 0.33% by 2006 US increased its ODA by 50% through Millennium Challenge Account yielding an extra $15 billion through 2006 Canada—pledged CAN$6 billion over five years ODA by sector shows worrying trends 1975-1980 Action relating to debt 7% Emergency 1995-2000 Social Emergency assistance infrastructure & Economic services 1% infrastructure & 11% Action relationg to assistance debt 6% Social infrastructure & services 14% 37% services 23% Programme assistance 12% Multisector Programme assistance 38% 5% Production Multisector Production sectors 3% sectors 11% 17% Economic infrastructure & services 15% Dramatic drop in FDI Billions of US$ FDI flows to Africa 20 $17B 15 10 $6B 5 0 2001 2002 29.4M adults and children live with HIV/AIDS as of end 2002 North America 980 000 Caribbean 440 000 Latin America 1.5 million Eastern Europe Western Europe & Central Asia 570 000 1.2 million East Asia & Pacific North Africa 1.2 million & Middle East South Asia 550 000 & South-East 6 million Sub-Saharan Africa 29.4 million Total: 42 million Australia & New Zealand 15 000 2.4M adult and child deaths from HIV/AIDS during 2002 North America 15 000 Caribbean 42 000 Latin America 60 000 Eastern Europe & Western Europe Central Asia 8 000 North Africa & Middle East 25 000 East Asia & Pacific 45 000 South 37 000 Sub-Saharan Africa 2.4 million & South-East Asia 440 000 Australia & New Zealand Total: 3.1 million <100 Africa needs 40% of global resources to tackle HIV/AIDS epidemic Millions of US Dollars Global Resources Needed by Region 16,000 14,000 12,000 Latin America & Carribean 10,000 Western & Eastern Europe & Central Asia North Africa & Middle East 8,000 East Asia & Pacific 6,000 South & South-East Asia 4,000 Sub-Saharan Africa 2,000 - 2001 2002 2003 2004 2005 2006 2007 Increasingly affordable prices Annual cost per person for triple therapy in Africa (US$) $12,000 $10,000 Drug Access Initiative $8,000 $6,000 Domestic production $4,000 Accelerated access initiative February-April 2001 offers $2,000 $0 1991 1993 2003 1995 1997 1999 2001 Poverty predicted to rise by 2015 500 Millions * Percent * * * 45 400 426 * 300 50 40 361 302 200 242 35 30 217 100 25 0 1987 Source: World Bank (2001) 1990 1998 20 2015 low-case 2015 base case scenario scenario Head Count Poverty, % 90 80 70 60 50 40 30 20 10 0 Zambia Uganda Tanzania Nigeria Niger Mauritania Mali Kenya Ghana Ethiopia But..some are making inroads into poverty Survey 1 Survey 2 Medium Term Outlook Sources of growth---primary commodities and natural resources--- remain fragile and vulnerable to exogenous shocks and subsidies Political determinants of growth---conflict weighing on economic performance and FDI Private sector performance is spotty—strong in South and North and weak elsewhere Agricultural modernization is stalled reducing prospects for poverty reduction Underlying macroeconomic fundamentals continues to improve. Growth of 4 % Thank you!