1

Survey of Economic and Social Conditions

in Africa in 2007Meeting of the Committee of Experts of the

1st Joint Annual Meetings of the AU Conference of Ministers of Economy and

Finance and ECA Conference of Ministers of Finance,

Planning and Economic Development

26-29 March 2008. Addis Ababa, Ethiopia

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Objectives of the SurveyReview recent growth performance at continental and regional levelsDiscuss the underlying factors of performanceExamine the progress made in achieving key targets in social developmentHighlight factors likely to affect growth prospectsHighlight key economic and social policy issues that deserve the attention of policy makers.

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The Global Context

World growth slowed down from 3.9 per cent in 2006 to 3.7 per cent 2007 and is expected to slowdown further in 2008.

High oil prices combined with turbulence in financial markets and slowdown in import demand in the US have contributed to global slowdown.

But these effects have been partially mitigated by domestic demand-led growth in other regions.

In this context, Africa has to encourage industrialization along with increased domestic demand and regional integration in order to promote international competitiveness and sustain growth.

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Africa achieved a 5.8 per cent growth rate in 2007, up from 5.7 per cent in

2006Real GDP growth (%), 2005-07

5.2 5.7 5.85.6 5.3 5.74.7

6.1 5.9

0

2

4

6

8

2005 2006 2007

Perc

ent

Africa Africa, excl. NA North Africa (NA)

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High growers vs. least performers

High growth variability across countries and regions, reflecting the vulnerability of Africa’s growth to developments in commodity markets and political instability

-3.5

-2.5

-0.5

1.0

1.0

7.0

7.0

7.0

7.5

8.5

9.5

9.5

10.0

11.0

21.0

-5 0 5 10 15 20 25

Somalia

Zimbabwe

Chad

Comoros

Mauritania

Tanzania

Gambia

Egypt

Mozambique

Malawi

Ethiopia

Liberia

Eq. Guniea

Sudan

Angola

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Higher growth rates in all regions in 2007 relative to 2006, except North

Africa

6.0

4.74.2

5.2

5.8

4.6

6.1

2.0

5.76.0

5.1

5.9

4.5

5.86.25.5

6.06.3

0

1

2

3

4

5

6

7

East Africa Southern Africa West Africa North Africa Central Africa Africa

2005 2006 2007

Growth is widely shared across regions; raising regional growth requires addressing regional constraints such as poor infrastructure and energy supply

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Factors explaining Africa’s economic performance in 2007

Strong commodity demand and continued high prices, especially for oil and minerals, combined with favorable rainfall in most countries.Continued consolidation of macroeconomic stability and improving macroeconomic management as well as greater commitment to economic reforms. However,

i. Fiscal sustainability remains a challenge for oil-importing countries

ii. Inflationary pressure is intensifying in many African countries iii. External balances are also a concern for oil importing

countriesiv. Currency appreciation threatens international

competitiveness, andv. External debt sustainability is a challenge for many

countries; there is a need to increase non-debt generating external resources.

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Factors explaining Africa’s growth in 2007 (cont’d)

Rising oil production in a number of countries and increasing non-fuel exports. Debt relief and increased private capital flows. Decline in political conflicts and wars, especially in West and Central Africa, though peace remains fragile in some parts of the continent.

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Sectoral performance shows limited diversification of the

production base Industry recorded the highest growth rate (5.7

per cent), followed by agriculture (5.0 per cent).

But industrial growth was driven by high commodity prices, especially for oil and gas, while manufacturing growth remains modest.

Africa’s tourism potential remains largely unexploited, while tourism is becoming a dominant sector in economic activity worldwide.

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Economic growth in Africa has not yet translated into meaningful social development and inclusion

of vulnerable groups

Unemployment remains high at 11.5% and 9.7% in 2006 in NA and Africa excluding NA, respectively.Poverty rates are low in NA, but high and almost unchanged in most countries in the rest of the continent. Overall primary school enrollment rate increased to about 70%, but remains below target. Gender equality improved across Africa, while child and maternal mortality remain high HIV/AIDS and other pandemics remain a major challenge for Africa: 68% of the 33.2 million people living with AIDS in the world are in Africa. The AIDS prevalence rate was 5% in Africa excluding NA in 2007.Africa’s youth continue to face many challenges in the labour market, while the elderly and the people with special needs are marginalized.

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Growth prospects for 2008: brighter outlook despite risks

6.1 6.36.2

5.4

6.6 6.4

0

1

2

3

4

5

6

7

East Africa West Africa North Africa Africa SouthernAfrica

Central Africa

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Factors of medium-term growth

Favourable factors

It is assumed that robust demand for commodity exports and high prices will continue with high growth in Asia and in the absence of a significant slowdown in Europe.

Continued effective macroeconomic management, especially efforts to contain inflationary pressures and ensure sound exchange rate and commodity revenue management.

Delivery of the promised aid and debt relief beside increased private capital inflows and domestic savings.

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Unfavourable factors

Risk of sharper than expected slowdown in the US economy and a fall in global commodity demand and prices.

High oil prices will hurt oil importers through the current account and inflationary pressures

Inefficient public infrastructure and unreliable energy supply at the national level as well as poor integration of transportation and energy networks at the regional level

Political instability in some countries

Weather conditions and inadequate agricultural technology (which amplifies the effects of shocks).

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Policy recommendationsAfrica needs effective national and regional strategies to

address key economic and social development challenges, including policies to: Accelerate and sustain growth. This includes:

Higher investment in infrastructure and energy supply Incentives for investment in new activities and sectors

to broaden production and export base. Increase domestic resource mobilizationMaximize benefits and confront the challenges of high oil prices Translate development financing commitments into actionTranslate economic growth into social developmentIntegrate socially excluded groups and provide for their needs

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Thank You For Your Attention