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Note: This document is from the archive of the Africa Policy E-Journal, published by the Africa Policy Information Center (APIC) from 1995 to 2001 and by Africa Action from 2001 to 2003. APIC was merged into Africa Action in 2001. Please note that many outdated links in this archived document may not work.


Africa: Economic Trends Mixed

AFRICA ACTION
Africa Policy E-Journal
July 30, 2003 (030730)

Africa: Economic Trends Mixed
(Reposted from sources cited below)

The Economic Commission for Africa (ECA), releasing its annual Economic Report on Africa today, painted a sobering picture of slowed growth rates for 2002 and "mixed" prospects for 2003, while citing successes in some countries. In addition to a continent-wide review, the report also contains detailed studies of Mauritius, Rwanda, Ghana, Gabon, Egypt, Mozambique and Uganda

The policy analyses and prescriptions in the report, prepared by ECA economists, are nuanced, broadly endorsing market liberalization but also more equitable poverty reduction strategies and accountability from donors as well as recipient governments. It is critical of both African governments and donors for not meeting commitments. It also critiques rich countries for undermining development by maintaining high subsidies for their own agricultural production while continuing to press African countries to further open their markets.

This posting contains the ECA press release announcing the report, and very brief excerpts from chapter 1 on the economic situation in 2002 and 2003. Despite its generally cautious language, the report's detailed analyses also contain some sharp critiques of current practices and innovative suggestions for incremental changes in particular policy areas. One or more future E-Journal postings will include additional brief excerpts from the book-length report,The full report is available now in PDF format on the ECA website at http://www.uneca.org/era2003

+++++++++++++++++end summary/introduction+++++++++++++++++++++++

ECA Press Release No. 11/2003

TOP AFRICAN PERFORMERS NAMED IN LATEST ECONOMIC REPORT

Addis Ababa, 30 July (ECA) -- African countries that have made the most progress in putting in place the right policies to reduce poverty top the rankings in the latest Economic Report on Africa (ERA 2003), the annual Economic Commission for Africa (ECA) flagship publication launched today.

The report, titled 'Accelerating the Pace of Development', examines how Africa can achieve growth rates necessary to attain the Millennium Development Goals. It ranks African countries based on the performance of macroeconomic, poverty reduction, and institution building policies, using an ECA-designed Expanded Policy Stance Index.

Botswana, South Africa, Mauritius, Namibia, and Tunisia rank highest, in that order, while the Republic of Congo is at the bottom followed by Zimbabwe, Chad, Guinea and Nigeria. The top performers have lower foreign debt, lower budget deficits, and lower interest rates. Market liberalization is more advanced in these countries, with few policy reversals; legal systems are more effective; infrastructure is of higher and more reliable quality and access is better; and pro-poor policies are more effective. The bottom five fare poorly on all these indicators.

The Report reveals that Africa's real GDP growth rate fell to 3.2% in 2002 from 4.3% in 2001, implying that only 5 of Africa's 53 countries achieved the 7% growth rate required to meet the Millennium Development Goals, 43 registered positive but below 7% growth rates, and 5 registered negative growth rates.

Seven countries -- Mauritius, Rwanda, Ghana, Gabon, Egypt, Mozambique and Uganda -- are subjected to in-depth study. The findings show that African governments are faced with four key challenges in accelerating the pace of development: escaping poverty; achieving fiscal sustainability to exit aid dependence; energizing African bureaucracies and moving to mutual accountability and coherence.

According to the Report, the outlook for Africa in 2003 is mixed, with growth expected to rebound modestly to 4.2%. Downside risks stem from the deteriorating political and economic situation in Zimbabwe and Liberia, with possible contagious effects in the western and southern sub regions. Renewed flooding and drought in various parts of the continent, especially in the Horn of Africa and the southern region, may affect agricultural production in 2003.

The failure of the Doha Development Round of multilateral trade negotiations to provide immediate duty-free and quota-free market access to the poorest countries hampers Africa's exports. At the same time, the US decision to introduce a six-year $51.7 billion farm bill boosting crop and dairy subsidies will reduce agricultural prices, making it difficult for small African countries to compete.

Yet despite the weak performance, African countries continued to strengthen their macroeconomic fundamentals and intensify their focus on reducing poverty and attracting domestic and foreign investment.

(END)

For more information on ERA 2003,
please contact Benedicte Walter,
Tel +251-1-44-32-28, fax +251-1-51 22 33, e-mail: bwalter@uneca.org or
visit the ERA 2003 website at http://www.uneca.org/era2003 for the full report in pdf, as well as the Media Kit, which includes backgrounders on each of the country studies.

To interview members of the ERA 2003 team listed below, please call +251-1-51-10-56:

Overall English Spokespersons:
Patrick Asea, Director, Economic and Social Policy Division, e-mail: pasea@uneca.org
Shamika Sirimanne, Senior Economist and ERA Team leader, e-mail: ssirimanne@uneca.org

Overall French spokesperson:
Oliver Paddison, Economist, e-mail: opaddison@uneca.org

For specific chapters:

Uganda: Shamika Sirimanne, Senior Economist, e-mail: ssirimanne@uneca.org

Rwanda: Niall Kishtainy, Economist, e-mail: nkishtainy@uneca.org

Mozambique: Kwabia Boateng, Senior Economist, e-mail: kboateng@uneca.org

Ghana: Patrick Asea, Director, e-mail: pasea@uneca.org

Egypt: Niall Kishtainy, Economist, e-mail: nkishtainy@uneca.org

Gabon: Jean K. Thisen, Senior Economist, e-mail: jthisen@uneca.org

Mauritius: Shamika Sirimanne, Senior Economist, e-mail: ssirimanne@uneca.org

Issued by the ECA Communication Team
P.O. Box 3001
Addis Ababa
Ethiopia
Tel: +251-1-51 58 26
Fax: +251-1-51 03 65
E-mail: ecainfo@uneca.org
Web: www.uneca.org


Excerpts from Chapter 1: Recent Economic Trenda in Africa and Prospects for 2003

Recent economic developments in Africa

Of the 53 countries in Africa, only 5 achieved the 7% growth rate in 2002 required to meet the Millennium Development Goals, 43 had growth below 7%, and 5 registered negative growth. For the region as a whole, real GDP grew 3.2% in 2002, compared with 4.3% in 2001.

Growth slows in regional powerhouses

The slowdown in regional growth is due to slower growth in four of the five largest economies in the region: Algeria, Egypt, Morocco, and Nigeria.

  • In Algeria the decline from 5% in 2001 to 2.7% in 2002, despite an increase in oil prices, reflects political and religious tensions, flooding in the east, and weak competitiveness in the industrial sector.
  • In Egypt the decline from 3.5% to 3% is due primarily to higher domestic interest rates, sluggish private sector growth, regional insecurity, and lack of political will by the government to implement far-reaching economic and social reforms, such as privatization and trade liberalization.
  • In Morocco the decline from 6.5% to 4.3% was due to weak domestic demand and reduced tourism.
  • In Nigeria growth declined from 4% to 2.6%, reflecting the combined effect of political risk and deteriorating economic fundamentals emanating from weak fiscal behaviour. 1990 2000

South Africa, which accounts for about 35% of the GDP of the five largest economies in Africa, grew 3% in 2002, up from 2.5% in 2001. This weak performance despite recent increases in the prices of its export commodities, particularly gold, is due in part to sluggish growth in the euro area. In addition, the appreciation of the rand against the dollar in the second and third quarters reduced the competitiveness of South African exports. And the South African Reserve Bank tightened monetary policy on a number of occasions to reduce inflationary pressures.

Southern Africa grew faster than the other subregions

With the exception of Southern Africa, growth slipped in all subregions by 3 percentage points in the north, 0.4 in the west, 0.5 in the east, and 1.5 in the centre.

  • In North Africa the decline reflects heightened political tension in the Middle East and the subdued growth in the euro area, a major trading partner.
  • In West Africa the decline is due in part to slower growth in Nigeria the largest economy in the subregion from 4% in 2001 to 2.6% in 2002. Reductions in the pace of economic activity in Burkina Faso, Guinea-Bissau, Niger, Senegal, and Sierra Leone also contributed.
  • In East Africa a 3.5% decline in Madagascar, coupled with modest declines in Djibouti, Ethiopia, Kenya, Somalia, and Tanzania, contributed to the slowdown.
  • In Central Africa the slowdown is due largely to declines in Equatorial Guinea (from 66.1% to 24.4%), Congo (from 2.9% to 1.7%), and Cameroon (from 5.2% to 4.9%). For the second year in a row, Equatorial Guinea is the fastest growing economy in Africa, thanks to oil and gas.
  • In Southern Africa growth increased from 2.4% in 2001 to 3.3% in 2002, largely reflecting improvements in South Africa, Angola, Lesotho, and Namibia.

Agriculture and food security

Since 2000 there has been a general deterioration in agriculture, reflecting the slowdown in global economic activity and poor weather. Estimates for 2001 suggest that agricultural production grew by a meager 0.8% in Sub-Saharan Africa (excluding South Africa). Although this is better than the 0.3% decline in 2000, it is far below the sector's average growth of 3.9% in 1992-96.

In 2002 unfavourable weather created severe problems. In Kenya flooding due to heavy rains affected about 30,000 people. In Senegal flooding in February killed 500,000 livestock, destroyed 20,000 homes, and damaged 2,500 hectares of crops. In Algeria agricultural output fell 3.2% in 2002, partly because of flooding in the east in July and August. In Botswana, Ethiopia, Lesotho, Malawi, Mauritania, Namibia, Niger, Swaziland,Tunisia, Zambia, and Zimbabwe drought and generally dry conditions reduced agricultural production.Tunisia's agricultural output declined 14% in 2002.

Despite the poor weather in some parts of the region, agricultural production was expected to grow in 2002 by 11% in Morocco, 5.1% in Uganda, 4.1% in Ghana, 4.0% in Nigeria, 3.4% in Egypt, 3.5% in Cameroon, 3.2% in South Africa, and 2.5% in Cote d'Ivoire.

Food insecurity-the lack of access by an individual or a group of individuals to enough food for an active, healthy life-is becoming a serious development challenge in the Sahel as well as in parts of eastern and southern Africa. In Ethiopia close to a quarter of the population faces the risk of famine and urgently needs food aid. In Zimbabwe 49% of the population requires emergency food aid, in Lesotho 30%, in Malawi 29%, in Zambia 26%, and in Swaziland 24%.

Declining productivity in agriculture and severe drought have reduced food security in Zimbabwe. After independence and several land reform attempts, most of the large commercial farms were still held by whites, then 1% of the population. In 2001 02 much of the commercial farmland was forcibly resettled, but having inexperienced farmers on commercial land hurt agricultural production.


Medium-term prospects - mixed

In the near term, growth prospects for African countries will depend mainly on the strength of recovery in global economic activity, the outlook for commodity prices, the progress in reducing political and armed conflicts, and the commitment of African leaders to macroeconomic stability and the principles of good governance.

Modest improvement in growth in 2003

Economic growth is expected to increase from 3.2% in 2002 to 4.2% in 2003, driven mainly by recent economic and political events in and outside Africa:

  • An increase in peace agreements and a reduction in armed conflicts: consider the ceasefire in Angola following the death of the UNITA rebel leader, Jonas Savimbi; the tentative peace in West Africa between Liberia and Sierra Leone; the cessation of hostilities in the Horn of Africa between Eritrea and Ethiopia; the July 2002 peace agreement between the Democratic Republic of Congo and Rwanda in Pretoria; and the recent resumption of peace talks between the Sudanese government and the rebel Sudan People's Liberation Army (SPLA). The cessation of hostilities in these countries is expected to result in a redirection of military spending towards economic and social projects that will reinvigorate growth.
  • An increase in the number of African countries eligible for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative. This is expected to free up resources for social expenditures directed at vulnerable groups and boost economic activity.
  • The bottoming out of the global slowdown. An improvement in economic activity should be expected in most of the world's regions in the third quarter of 2003, spurring economic activity in Africa through increased aid, trade, and foreign investment. In the OECD area growth is expected to increase from 1.5% in 2002 to 2.2% in 2003, in the United States from 2.3% to 2.6%, and in the European Union from 0.9% to 1.9%. Japan is expected to move from a negative growth rate of 0.7% in 2002 to a positive growth rate of 0.8% in 2003.
  • The decision by six West African countries to form a monetary union in 2005.The attempts by governments to meet the convergence criteria are likely to improve the macroeconomic policy environment in the subregion, boosting future growth.
  • The events of September 11, 2001, and the resulting international war against terrorism. Economic effects for Africa will be positive to the extent that the activities of militant groups are checked in unstable African countries and that western nations become more involved in the economic and political development of African nations to discourage them from providing safe-havens to terrorists.There are already indications that this is happening. Africa featured prominently on the agenda of the last G-8 Summit in Kananaskis, Canada. And several advanced countries have promised to support development efforts in Africa.

The pace of economic activity is expected to improve next year in all five subregions. In 2003 growth is projected to be 4.9% in North Africa, 4.4% in East and Central Africa, 3.6% in Southern Africa, and 3.3% in West Africa. North Africa is projected to have the highest growth rate in the region, driven by strong growth in Algeria (5.9%), Sudan (5.7%), Tunisia (5.5%), and Egypt (4.6%). East Africa is projected to have the second highest growth rate in the region, driven by strong growth in Rwanda (6.5%), Uganda (6%), Madagascar (5.5%), Tanzania (5.2%), and the Democratic Republic of Congo (3.8%).

All West African countries-except Cote d'Ivoire, Liberia, Guinea-Bissau, and Sierra Leone-are projected to have growth of 3.0% or more in 2003, underpinned in part by an expected improvement in the prices of key commodities exported by the subregion - notably gold, oil, and cocoa. Guinea Bissau will grow by a meager 1.5%, and Liberia by 1.6%. Economic activity is expected to pick up in Nigeria, with growth projected at 3.0%. Underpinning the improvement would be an increase in oil revenue if OPEC increases its oil quota.Nigeria has already indicated that it would ask for an increase in its quota, likely to be approved if political tensions between the United States and Iraq continue unabated.

In Southern Africa growth is expected to increase from 3.3% in 2002 to 3.6% in 2003 reflecting improvements in the prices of key export commodities gold, oil, diamonds, and copper. Zimbabwe is expected to have a negative growth rate ( 4.6%), explained in part by the political and economic crisis in the country.With an expected growth rate of 10.2% Mozambique will be the fastest growing economy in the subregion, thanks to sound macroeconomic policies and funds from debt relief under the HIPC Initiative. Because of the likelihood that gold and diamond prices will increase, growth is expected to rise in South Africa from 3.0% in 2002 to 3.3% in 2003.

With Equatorial Guinea continuing to have very impressive growth of 21.7% and with strong growth in Cameroon and S o Tom‚ and Principe, the Central African subregion is expected to have a slight boost in growth from 4.0% in 2002 to 4.4% in 2003.

Risks and uncertainties

As usual, there are some downside risks to the realization of the projected growth rate for Africa:

  • The deteriorating political and economic situation in Zimbabwe and Cote d'Ivoire.
  • Renewed incidents of flooding and drought in various parts of the continent, especially in the Horn of Africa and the Southern African region.
  • The decision by U.S. President Bush in May 2002 to introduce a six-year $51.7 billion farm law, boosting crop and dairy subsidies by 67%. There is the concern that the subsidy will lead to lower prices for agricultural products, making it difficult for small African countries to compete on the world market.
  • Inflationary pressures in two of the five big economies in Africa South Africa and Nigeria as well as in countries such as Angola, Zimbabwe, the Democratic Republic of Congo, and Malawi would reduce the ability of the monetary authorities to stimulate the economy.
  • The high probability of an El Ni¤o phenomenon in 2003 as suggested by the International Research Institute for Climate Prediction and the associated deterioration of global weather conditions.

In sum, the mixed prospects for Africa in the medium term will be influenced largely by the strength of the recovery in global economic activity, developments in commodity markets, progress in reducing regional insecurity, adoption of sound macroeconomic policies and the principles of good governance, and the ability and willingness of African leaders to intensify much-needed economic and social reforms.

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Date distributed (ymd): 030730
Region: Continent-Wide
Issue Areas: +economy/development+ +security/peace+


The Africa Action E-Journal is a free information service provided by Africa Action, including both original commentary and reposted documents. Africa Action provides this information and analysis in order to promote U.S. and international policies toward Africa that advance economic, political and social justice and the full spectrum of human rights.

URL for this file: http://www.africafocus.org/docs03ej/eca0307.php