The African Economic Outlook draws upon the expertise of the AfricanDevelopment Bank, theOECD and the United Nations Economic Commission for Africa. This Overview provides an overall analysis of the state of Africa’s economies at a continental and regional level in a global context. In this year’s edition, the special focus is on technical and vocational skills development.
A FAVOURABLE INTERNATIONAL SITUATION and good control over macroeconomic aggregates have enabled Algeria to maintain respectable levels of economic growth since 2002; these remain beneath the country’s potential, however, particularly in non-hydrocarbon growth. The continued increase in revenue from hydrocarbons has allowed the country to achieve high investment rates and controlled wage increases, but unemployment remains high, especially amongst young people. The country has been able to discharge most of its external, public and multilateral debt thanks to prepayments. Compared to economies with a similar revenue level, the Algerian economy is still poorly diversified, and the contribution of the private sector to total GDP remains weak.
THE ANGOLAN ECONOMY GREW by an estimated 19.8 per cent in 2007, up from 18.6 per cent in 2006, boosted by increasing oil production and prices. The non-oil sector also performed well, notably construction, agriculture, manufacturing and financial services, although slightly less well than the previous year. Inflation has remained steady in the past two years, with the consumer price index increasing 12 per cent in 2006 and 11.8 per cent in 2007. This is a significant decrease from the 19 per cent inflation rate in 2005.
BENIN’S SOCIAL AND POLITICAL SITUATION has been peaceful for over a decade. The wide-ranging national consultation held between 19 and 28 February 1990 brought an end to the profound socio-political and economic crisis that the country suffered during the late 1980s. This consultation, known as the "Conférence nationale des forces vives" (National Conference of Dynamic Forces) was the first of its kind in Africa, and brought different strands of opinion, development organisations from various parts of the country, business and trade organisations, and religious communities together around the same table. It resulted in a number of important resolutions, notably i) to establish a liberal democracy based on respect for fundamental human liberties, ii) to promote the rule of law and iii) to adopt free-market principles.
BOTSWANA HAS BEEN AMONG the fastest-growing economies in Africa over the past 40 years. Sound macroeconomic policies and good governance have parlayed the country’s diamond resources into a remarkable transformation from one of the poorest countries in the world at independence to upper middle-income status. These impressive achievements have earned Botswana the highest sovereign debt ratings and best Transparency International anticorruption rank in Africa. GDP growth is estimated to have been 6.0 per cent in 2006/07 and is expected to remain buoyant at over 5 per cent in 2007/08 and 2008/09.
BURKINA FASO REMAINS ONE of the poorest countries in the world, with 44.8 per cent of its population living on less than USD 1 per day. Nevertheless, economic activity has taken a qualitative leap over the past ten years, showing average growth of 5.9 per cent between 1997 and 2006. The growth rate reached 6.1 per cent in 2006, compared to an average of 3.1 per cent in the West African Economic and Monetary Union (WAEMU). These very positive results are due to the pursuit of structural reforms and of steady investment. In 2007 growth nevertheless slowed down to a rate of 4.3 per cent, due to the fall in cotton production. It is expected that there will be a progressive recovery, with projections of 4.7 per cent growth for 2008 and 5.8 per cent for 2009.
THE ECONOMY PICKED UP IN 2007 despite the continued decline in oil production, which has been undermining growth since 2005.Growth was estimated at 3.6 per cent in 2007, as against 3.2 per cent in 2006. This trend should continue in 2008 and 2009, with 4.8 and 4.6 per cent growth projected respectively. Public investment should be the main driver, fuelled by substantial resources liberated through debt reduction. The implementation of fiscal reform in 2008 should reduce the country’s dependence on diminishing oil revenues.
CAPE VERDE’S ECONOMY IS ESTIMATED to have grown by 6.6 per cent in 2007, down from 10.8 per cent in 2006. This strong growth reflects a relatively high rate of execution of the public investment programme (PIP) and a dynamic private sector, supported by a substantial increase in domestic credit and private investment, including large inflows of foreign direct investment (FDI). In 2008 and 2009, real GDP is expected to grow by 7.6 per cent and 7.0 per cent respectively.The annual average inflation rate fell to 4.5 per cent in 2007, from 6 per cent in 2006, and it is projected to drop further to under 3 per cent in 2008.
AFTER STAGNATING FOR MOST of 2006, Chad’s economy shrank 0.3 per cent in 2007 as activity in the oil sector declined. This was despite relatively good non-oil sector results, mainly due to a healthy performance by government services and its positive effects on the activities of non-oil branches.The oil sector contracted because of a fall in output, even though substantial investment was made to deal with premature water flooding in wells and a new oil field (Maikeri) came into production in the second half of 2007.
ALTHOUGH THE DAMAGE CAUSED by recurrent civil wars is still evident, the Republic of Congo has reached a crossroads. Skyrocketing oil prices and the prospect of debt relief under the augmented Heavily Indebted Poor Countries (HIPC) Initiative have created favourable financial conditions for greater sustainable growth over the medium term as well as for achieving the Millennium Development Goals (MDG). Still, rapid growth and high levels of government expenditure in the context of low absorptive and administrative capacity risk compromising macroeconomic stability, the sustainability of public finances and foreign competitiveness.
Democratic Republic of Congo
IN 2007, THE COUNTRY RECORDED economic growth of 6.2 per cent, lower than the objective of 6.5 per cent but higher than the rate of 5.1 per cent rate posted in 2006. A faster growth rate is forecast for 2008 and 2009.
CÔTE D’IVOIRE IS STILL FACING the consequences of the political crisis and its high points: the coup of 1999, the contested elections of 2000 won by current President Laurent Gbagbo, and the armed conflict of 2002 between the rebels and government forces. Beginning in September 2002, the conflict caused the flight of nearly 1.7 million people, the destruction of economic infrastructure and the breakdown of government administration. As it persisted, the crisis also brought a drastic fall in output, a substantial drop in employment and worsening security conditions.
IN 2005/06 AND 2006/07, GDP GROWTH in Egypt averaged about 7 per cent.Manufacturing, construction, real estate and tourism were the main sectors driving growth. On the demand side, growth was mainly led by private investment and to a much lesser extent by private consumption and government spending. Sharp cuts in tax rates and customs duties helped to stimulate demand.
THE STRENGTH OF EQUATORIAL GUINEA’S economic growth was confirmed in 2007, with real GDP growth of 9.8 per cent compared with 5.3 per cent in 2006. The boost to the country’s economy is due mainly to improved oil and gas production and the buoyancy of public infrastructure-construction works. This was accompanied by continuous improvement in the performance of the construction sector, banking services, telecommunications, tourism and wood processing.
THE ETHIOPIAN ECONOMY CONTINUES the strong performance witnessed since 2004, with real GDP estimated to have grown by 8.2 per cent in 2006/07, well above the 5.4 per cent registered in 2005/06. This growth was broad-based, with industry, agriculture and services all expanding strongly
THE LEGISLATIVE ELECTIONS IN December 2006 inaugurated a year of institutional stability in Gabon. To no great surprise, the President’s Gabonese Democratic Party (PDG) won 82 of the 120 seats in theNational Assembly. This political stability provides the authorities with a favourable environment for deepening structural reforms aimed at diversifying the economy and rendering public finances viable in the long term.
THE GHANAIAN ECONOMY is exhibiting a changed economic outlook, with improving growth reflecting both strong economic fundamentals and a positive response to them from the private sector. Improved macroeconomic policies, in particular an antiinflationary monetary policy and a consolidated fiscal policy, are contributing to the growth upsurge. The private sector is responding positively to the improved business environment, with rising bank lending and capital inflows suggesting increased investor confidence in the domestic market.
THE KENYAN ECONOMY GREW at an estimated rate of 6.6 per cent in 2007, up from 6.1 per cent in 2006. This reflects broad-based economic growth in most sectors.Under the Economic Recovery Strategy (ERS) which ended in 2007, investor confidence was restored, farmprices improved, and rural electrification proceeded in many parts of the country. Before the eruption of the current crisis following the disputed presidential elections, the economy appeared to be on track to maintain or improve upon its performance in 2007. However, it now appears likely that growth will be much less than expected in 2008. Assuming that the crisis is short-lived, the impact is expected to bemodest, followed by a small increase in growth in 2009. The implementation from2008 ofVision 2030—a strategy comprising successive five-year plans, the first of which provides for increased investments in infrastructure and other key sectors — is expected to provide continued impetus to growth.
LIBERIA IS A FRAGILE STATE UNDERGOING a postconflict transformation with the assistance of the international community, which has deployed peacekeepers and police personnel to support the stability of the country’s political and security situation. Within the constraints of several war-induced impediments, including a collapsed infrastructure, degraded institutional capacity and loss of experienced and skilled manpower, the economy has rebounded strongly following the cessation of conflict. Real GDP growth has risen strongly since 2004, reaching an estimated 8.0 per cent in 2007. As a consequence of the gradual improvement in security in rural areas agricultural production has revived, and there has been a resumption ofmining and forestry activity. RealGDP growth is projected to rise to 9.2 per cent in 2008 and further to 11.0 per cent in 2009.
LIBYA’S ECONOMY FACES THE PROBLEM of all oildependent economies, namely that its meagre diversification puts the country’s economic growth, government investment programmes and macroeconomic indicators at themercy of fluctuations in the energy market. Another problem, typical of countries making the transition to a market economy, is that its weak institutions, unsuitable legal system and structural rigidity slow down the reforms needed. In addition, Libya was for many years subject to international economic sanctions imposed by theUnited Nations (1992-99) and the United States (1986-2006). The overall result has been Libya’s isolation from world trade, keeping away the foreign direct investment (FDI) that such a country traditionally needs for its oil and gas industry.
MADAGASCAR IS ONE OF SUB-SAHARAN AFRICA’S poorest countries, and its structural weaknesses, notably in public finance management, slow its growth and economic and social development.The financial system is also precarious, and the country remains vulnerable to external shocks as well as to climatic hazards. Nevertheless, the government is set on strengthening the economy through its bold 2007-12 Madagascar Action Plan (MAP), which aims to continue structural reforms, diversify levers for growth and achieve the Millennium Development Goals (MDGs).
DESPITE REMAINING ONE OF THE POOREST and least developed countries in Africa,Malawi is beginning to make real progress in terms of laying the foundations for faster economic growth and more effective poverty reduction.
ECONOMIC GROWTH IN MALI was fairly strong — in the 4.2 per cent range — in 2007. This was nonetheless a fall from2006, when growth had reached 5.3 per cent. It is expected to be somewhat higher in 2008 and 2009. The 2007 growth slowdown is explained by a decline in the production of cotton (the main engine of the economy) and gold. On the other hand, food production progressed well.Mali has just successfully concluded its three-year programme with the InternationalMonetary Fund (IMF). TheWorld Bank and the African Development Bank (AfDB) are considering adjusting their country strategy to align it with the Growth and Poverty Reduction Strategy Paper (GPRSP) for 2007-11. Despite these encouraging results, Mali needs to reinforce its implementation of structural reforms so as to consolidate revenues, control expenditures and accelerate economic growth.This will involve, amongst other measures, restraining tax exemptions, and privatising the Compagnie malienne pour le développement des textiles (CMDT) and Énergie du Mali (EDM).
IN SPITE OF INCREASES IN THE PRICES of imported food and fuel and of the lingering effects of the end of preferential trade agreements, theMauritian economy has performed well. In 2007 it continued to recover from weakness in the sugar sector, growing by 5.6 per cent, up from 3.9 per cent in 2006. Excluding sugar, the economy has performed even better, as the growth rate was 6.4 per cent compared to 5.3 per cent in the previous year. The good performance of the economy in 2007 was in large part driven by a boom in the tourism sector, which in turn led to strong growth in the construction sector, and by a better performing textile industry.
MOROCCO’S ECONOMIC PERFORMANCE in recent years has been remarkable, due to both favourable international conditions and macroeconomic modernisation underlined by reforms to boost competitiveness and diversification.Thriving production sectors greatly increased imports due to increased investment, lower customs duties and strong internal demand. Financial sector reform and stabilisation of government spending has made it easier to attract financial investment since 2001, amounting to an average 2.9 per cent of GDP a year.
MOZAMBIQUE REMAINS A SUCCESSFUL example of post-conflict transition, with impressive economic growth averaging 8 per cent from 2000 to 2006 and sustainedmacroeconomic and political stability. Strong economic growth continues to be driven primarily by foreign-financed "mega-projects" and large aid inflows.
NAMIBIA HAS EXPERIENCED a decade of moderate growth, averaging 4.2 per cent per year, thanks mainly to strong performance in diamond production and sound macroeconomic policies.However, the country is also characterised by a skewed income distribution and persistent poverty.
NIGER’S ECONOMY GREW AT AN AVERAGE rate of 3.6 per cent during the last four years, barely above the estimated population growth rate of 3.3 per cent. Despite a recession in 2004, Niger still turned in two years of relatively high growth, with 7.2 per cent in 2005 and 4.8 per cent in 2006. Noteworthy developments in 2007 were a good agricultural growing season, a pick-up in investment, particularly in themining sector, and the continued implementation of the economic and financial programme supported by the international financial institutions.
THE YEAR 2007 WAS AN EVENTFUL one in Nigeria, both politically and economically. Growth slowed in the face of continued turmoil in the oil-producing Niger Delta, but medium-term economic prospects are supported by high oil prices and prudent macroeconomic policies. At the political level, the elections were marred by widespread allegations of fraud and intimidation, but the new president has nonetheless assumed office peacefully and appears committed to economic reform.
RWANDA HAS MADE CONSIDERABLE PROGRESS in recovering from the 1994 war, exhibiting impressive growth averaging about 8 per cent a year during the period 1996-2005. In 2007,GDP growth is estimated at 4.9 per cent, down from the 5.3 per cent registered in 2006. The slowdown was due to poor growing conditions which caused agricultural output to fall. Growth is expected to slow further to 4 per cent in 2008, but to accelerate to 5.6 per cent in 2009.
SENEGAL’S GDP GREW AT A RATE of 2.1 per cent in 2006 and 2.8 per cent in 2007, well below previous forecasts. This was due to a number of factors. First, the crisis experienced by Industries chimiques du Sénégal (ICS), the country’s largest phosphates producer, was still unresolved. Second, higher levels of prices for oil products have continued or even worsened, affecting state subsidies, price levels and the budget deficit. In addition there was poor rainfall and a weak system for marketing groundnuts. As a result of the combination of these factors,most of the country’s traditional export sectors (fish products, phosphates, groundnuts) experienced stagnation or are in serious economic difficulties, with Senegal losing substantialmarket share compared with all its competitors.
AFTER PRIVATE CONSUMPTION FUELLED by easy credit resulted in a 5.4 per cent increase in realGDP in 2006, growth in 2007 is estimated at 4.9 per cent following slower consumption due to monetary tightening. Economic activity is expected to slow further to 4 per cent in 2008 as a result of the continued deceleration of private consumption and energy shortages. In 2009, growth is expected to remain strong although investment will replace consumption as its principle driver. Inflation, which rose sharply in 2007 to 6.5 per cent due to oil and food price increases, is expected to increase further to almost 7 per cent in 2008 before edging back into the target band of 3 to 6 per cent in 2009.
TANZANIA HAS MANAGED TO NOT ONLY overcome the aftermath of adverse weather shocks in 2005 and 2006 and an outbreak of Rift Valley Fever during 2007, but also shows signs of a recovering economy. Favourable weather conditions enabled a good harvest in 2007 and provided adequate water levels for the operations of hydropower dams that are themain source of electric power generation. The economy is projected to grow by 6.6 per cent in 2007 compared to 6.7 per cent in 2006.The outlook is encouraging for subsequent years aswell,withGDP growth expected tomaintain the same momentum, at 6.5 per cent in 2008 and 6.7 per cent in 2009. However, the recent increase in fuel prices, the newly announced wage regulations for the private sector and the political turmoil in Kenya may dampen this outlook.
TUNISIA SEEMS TO HAVE SUCCEEDED in meeting the 1 January 2008 deadline, the day the Free Trade Zone Agreement with the European Union (EU) became effective, with a competitive, up-to-scratch economy, well-directed macroeconomic aggregates, and sound, cautious policies.
UGANDA CONTINUES TO SUSTAIN THE SUCCESS of the last two decadeswith the economy characterised by high growth and lowinflation.The realGDP growth ratewas 6.0 per cent in the 2006/07 fiscal year and is projected to rise to 6.2 per cent in 2007/08. Economic performance in 2006/07 benefited fromincreased export diversification and investment in construction and services. The base of Uganda’s growth seems to be broadening as reflected in the introduction of newproducts, exports, technology and movement of labour into new occupations. But growth remains belowpotential because of infrastructure constraints, especially the energy deficit, and shocks as a result of flooding that destroyed crops and transport infrastructure in some areas.
IN 2007, THE ECONOMY GREW JUST 5.8 per cent in Zambia, down from 6.2 per cent in 2006, primarily due to slower growth in the volume of copper production.The construction sector remained buoyant however, with growth remaining stable in 2007. In 2008 and 2009, the economy is expected to recover to just above 6 per cent growth with a strong increase in copper exports following huge investments in 2006 and 2007. This expansion in volume is expected to offset declining world market prices. On the negative side, adverse weather and increasing power outages at the beginning of 2008 will limit growth in agriculture and manufacturing.
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