Africa Opportunities and Challenges Roger Nord Kampala, July 2013 - - PowerPoint PPT Presentation

Africa – Opportunities and Challenges

Roger Nord Kampala, July 2013

Ou Outl tline ine

• The Growth Take-Off in Sub-Saharan

Africa

• The Economic Outlook for SSA in

2013-14

• Short-term Risks and Medium-term

Challenges

Per er Cap apita ta GDP: : Ke Keep eping ng Up Wi p With th Oth ther er Reg egion

• ns

International Comparisons: GDP per Capita (Index 1995=100 In real US dollar)

50 100 150 200 250 300 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Sub-Saharan Africa Middle East and North Africa Central and Eastern Europe Developing Asia Industrial countries Western Hemisphere SSA (non-resource GDP)

Sub-Saharan Africa

4 Excludes China for presentation purposes, as China's growth is much higher than that for the

• ther countries. ASEAN 5 = Indonesia, Malaysia, the Philippines, Singapore and Thailand.

50 100 150 200 250 300 350 400 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Real GDP per capita (Index, Takeoff = 100) Years after takeoff India, 1982 ASEAN-5, 1973 Vietnam, 1990 Uganda, 1986 Tanzania, 1995 Mozambique, 1992 Rwanda, 1995

Sources: IMF, World Economic Outlook.

Wha hat t Is Is Not

• t Drivi

ving ng Growth

• wth (1)

1): : En Endo dowme ment nt an and G d Geo eogr grap aphy hy

Sub-Saharan Africa: Real GDP per Capita Growth (Annual Percent)

Sub-Saharan Africa Oil- exporting Non-oil Resource intensive Non-resource Coastal Non-resource Landlocked

• 2
• 1

1 2 3 4 5 1980–94 1995–2010

Wha hat t Is Is Not

• t Drivi

ving ng Growth

• wth (2)

2): Nat atura ural Res esou

• urces

rces

(excluding Equatorial Guinea from resource-rich)

75 100 125 150 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 SSA Resource-Rich (excl Equatorial Guinea) SSA not-Resource-Rich SSA LICs Resource-Rich SSA LICs not-Resource-Rich

GDP per Capita (Index 1995=100)

Wha hat t Is Is Not

• t Drivi

ving ng Growth

• wth (3)

3): : Te Terms ms of

• f Tr

Trad ade

50 100 150 200 250 300 1985 1990 1995 2000 2005 2010

High-growth non-resource-rich Low-growth Medium- growth High-growth resource-rich

Sub-Saharan Africa: Terms of Trade (Index, 1995 = 100)

Wha hat t Has as Hel elpe ped d (1) 1): Disi sinflati nflation

• n

5 10 15 20 25 30 35 40 5 10 15 20 25 30 35 40 1985 1990 1995 2000 2005 2010 High-growth resource-rich Low-growth Medium- growth High-growth non- Resource-rich

Sub-Saharan Africa: Inflation (Percent)

Wha hat t Has as Hel elpe ped d (2) 2): : Ex Externa ternal l Deb ebt

25 50 75 100 125 150 175 200 1985 1990 1995 2000 2005 2010 Low-growth Medium- growth High-growth non-resource-rich High-growth resource-rich

Sub-Saharan Africa: External Debt (Percent of GDP)

Wha hat t Has as Hel elpe ped d (3) 3): Res eserves erves

Source: IMF, African Department database. 5 10 15 20 25 30 35 1985 1988 1991 1994 1997 2000 2003 2006 5 10 15 20 25 30 35 International reserves (Percent of GDP) Low growth Medium growth High growth nonresource rich High growth resource rich

Wh What at Ma May Hav ave e Hel elpe ped d (1) 1): Cha hang nging ng tr trad ade e Pat atte terns rns

11 Source: IMF, Direction of Trade Statistics. 10 20 30 40 50 60 70 80 90 100

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Percent of total exports

Exports

10 20 30 40 50 60 70 80 90 100

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Percent of total imports

Imports

DAC member countries India Sub-Saharan Africa China Brazil Others

Wha hat t Ma May Hav ave e Hel elpe ped d (2) 2): Risi sing ng Ai Aid d In Infl flows

• ws

log of aid to SSA (Constant 2005 dollars, left scale) log of SSA real per capita income (Right scale) 9.3 9.4 9.5 9.6 9.7 9.8 9.9 10.0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 4.4 4.5 4.6 4.7 4.8 Sources: Roodman (2006), and IMF, staff calculations.

Wha hat t Ma May Hav ave e Hel elpe ped d (3) 3): : Pol

• liti

tica cal/Structural l/Structural Ref efor

• rm

1 2 3 4 5 1985 1990 1995 2000 2005 2010

(Rank, 1=low, 7=high)

High-growth non-resource-rich Low-growth Medium- growth High-growth resource-rich

Constraints on Chief Executive

Ou Outl tline ine

• The Growth Take-Off in Sub-Saharan

Africa

• The Economic Outlook for SSA in

2013-14

• Short-term Risks and Medium-term

Challenges

Glob

• bal

al Con

• nte

text t 1: 1: Mu Multi ti-Spee Speed d Grow

• wth

th

15

Real GDP Growth, selected countries/groups (Percent)

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 United States Euro area Japan Emerging Market and Developing Economies Average 2010-12 Average 2013-14

Glob

• bal

al Con

• nte

text t 2: 2: Im Impr prov

• ving

ing bu but bum t bumpy py

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World Commodity Prices, 2007–14

• Commodity prices projected to ease somewhat
• Short-term risks, especially “tail risks,” are receding; medium-term risks persist
• Monetary stimulus in advanced economies—liquidity for frontier countries?

World: Growth Prospects, 2006-2014

• 1

1 2 3 4 5 6 7 2006 2007 2008 2009 2010 2011 2012 2013 2014 50 percent confidence interval 70 percent confidence interval 90 percent confidence interval Baseline 50 100 150 200 250 2007 2008 2009 2010 2011 2012 2013 2014 Index, 2005=100 Food Metals Petroleum Agricultural raw materials

Growth

• wth in S

n Sub ub-Sa Saha haran ran Af Africa ca to to rem emai ain n str tron

• ng

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Selected Regions: Real GDP Growth 2007–14 Sub-Saharan Africa: Real GDP Growth, 2007–14

• Domestic demand, especially investment, and exports (including owing to new

capacity to produce minerals) expected to lead growth

• MICs negatively affected by slow Europe and labor unrest in South Africa
• Fragile countries set to outperform average SSA

2007 2008 2009 2010 2011 2012 2013 2014

• 4
• 2

2 4 6 8 10 12 14 Percentage change World Developing Asia Sub-Saharan Africa 2007 2008 2009 2010 2011 2012 2013 2014

• 4
• 2

2 4 6 8 10 12 14 Poercentage change Oil Exporters Middle-income countries Low-income countries Fragile countries

Ri Rising ng inves estm tment ent remains s driver r of growt wth

18

Sub-Saharan Africa: Investment, 2010–14

14 16 18 20 22 24 26 28 30 2010 2011 2012 2013 2014 Percent of GDP Oil exporters Middle-income countries Low-income countries Fragile countries

Ou Outl tline ine

• The Growth Take-Off in Sub-Saharan

Africa

• The Economic Outlook for SSA in

2013-14

• Short-term Risks and Medium-term

Challenges

Sh Shor

• rt-term

term Risks ks 1: 1: Th The gl e glob

• bal

al ec econ

• nom
• my

20

Euro area downside scenario :

• Lower investment in the euro-area

periphery

• Global output and commodity prices

persistently lower than the baseline

• SSA’s growth persistently reduced by up

to ¼ percentage point Emerging markets downside scenario :

• 10 percent fall in investment in BRICs

plus South Africa in 2013

• Global output and commodity prices

significantly lower than the baseline in 2013, recovering subsequently

• Growth in SSA (excluding South Africa)

reduced by ½ percentage point in 2013

Sub-Saharan Africa: Real GDP growth in alternative scenarios, 2013-18

4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 2013 2014 2015 2016 2017 2018 Percent Baseline Euro area downside … 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 2013 2014 2015 2016 2017 2018 Percent Baseline excl. South Africa Emerging markets downside scenario excl. South Africa

Sh Shor

• rt-term Risks 2: Debt levels fell …

21

Sub-Saharan Africa: Density of Total Public Debt, 2000-12

40 80 120 160 200 240 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Percent of GDP

Interquartile range Median

Mean

• Based on the DSAs, public debt levels have fallen sharply since 2000.
• External debt relief through HIPC and MDRI reduced debt levels by

about 50 percent of 2012 GDP.

• The decline in debt levels was halted by the global recession.

Sources: IMF, DSA database; and IMF staff calculations. Note: For any given year, the "box and whiskers" plot (or boxplot) summarizes the distribution, during that year, of debt to GDP for 44 countries in sub-Saharan Africa (outliers not shown). Debt to GDP ratios pertain to public sector debt as defined in the Debt Sustainability Framework.

Sh Shor

• rt-term Risks 2: … but are now rising

22 Sub-Saharan Africa: Public Sector Debt in 2012 and Sustainability Thresholds, PRGT-Eligible Countries

10 20 30 40 50 60 70 80 90 Cameroon Chad Congo, Republic of Nigeria Cape Verde Ghana Lesotho Senegal Zambia Benin Burkina Faso Ethiopia Gambia, The Kenya Madagascar Malawi Mali Mozambique Niger Rwanda Sierra Leone Tanzania Uganda Burundi Central African Rep. Comoros Congo, Dem. Rep. of Côte d'Ivoire Guinea Guinea-Bissau Liberia São Tomé & Príncipe Togo Oil exporters Middle- income countries Low-income countries Fragile countries Percent of GDP External Domestic Calibrated threshold DSF threshold

Th Thir irtee teen n countries ntries in in SS SSA now have e sovereign vereign bonds ds outs tstanding tanding

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Bond Issuances No bond issuance Has issued bonds Issued Diaspora bond

Th The e sea earch ch fo for yiel eld d ha has rea eache hed d fr fron

• nti

tier er ec econ

• nom
• mies

es

24 1 2 3 4 5 6 7 8 9 10 2004:Q1 2005:Q1 2006:Q1 2007:Q1 2008:Q1 2009:Q1 2010:Q1 2011:Q1 2012:Q1 2013:Q1 Billions of U.S. dollars

Sub-Saharan Africa: Recent Sovereign Issuances (Excl. South Africa)

Tanzania Ghana Zambia Gabon Namibia Republic of Congo Nigeria Seychelles Senegal Côte d'Ivoire

Bu But t bo bond nd i issua uance nce ha has no not t be been en mat matche hed d by by hi high gher er pu publ blic inv nves estme tment nt

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Sub-Saharan Africa: Public Investment after Bond Issuance

10 20 30 2004 2005 2006 2007 2008 2009 Percent of GDP Ghana 10 20 30 2006 2007 2008 2009 2010 2011 2012 Percent of GDP Senegal 1 Bond amount issued Public investment Private investment Year of issuance

Source: IMF, World Economic Outlook database.

1 Part of the proceeds from the bond issued in 2011 was used to exchange and repurchase the bond issued in 2009.

Medium dium-term term Challenges llenges (1): : Natural tural Resources

• urces

10 20 30 40 50 60 70 80 90 100 Angola Equatorial Guinea Congo, Dem. Rep. of Nigeria Guinea Gabon Congo, Rep. of Chad Botswana Zambia Sierra Leone Mali Namibia Niger Cameroon Zimbabwe Tanzania Ghana Central African Rep. South Africa Burkina Faso Lesotho Côte d'Ivoire Uganda Senegal Ethiopia Mozambique Kenya Madagascar Malawi Rwanda Percent of total exports of goods

Source: IMF, African Department database. 1 Data for Côte d'Ivoire and Senegal excludes re-exports of refined

• il products.

SSA Resource Exports, Average 2005-2011¹

SSA A Resource rce Revenue, e, Avera rage e 2005-2011 2011

Natural Resource Share High Impact >=50% of Total Revenue (excluding grants) Medium Impact 20-50% of Total Revenue (excluding grants) Low Impact <20% of Total Revenue (excluding grants)

59 72 78 78 81 91 24 29 32 39 2 2 3 3 4 6 7 8 17

10 20 30 40 50 60 70 80 90 100

Zimbabwe Tanzania South Africa Sierra Leone Central African Rep. Ghana Namibia Zambia Niger Mali Guinea Congo, Dem. Rep. of Cameroon Botswana Gabon Chad Nigeria Angola Congo, Rep. of Equatorial Guinea

Sub-Saharan Africa: Natural Resurce Revenue Share as % of Total Gov. Revenue

Macro roeco econom

• mic

ic volati tility: ty: elevate ted in many natu tura ral- re resource rce export rters. rs.

2 4 6 8 10 12 Fiscally dependent economies Oil exporters Other resource exporters Other SSA Non-SSA resource exporting countries Standard deviation, percent Real nonresource GDP growth Budget outlays to nonresource GDP

Volatility Indicators, 2000–10

Me Medi dium um-term term Cha hallen enge ges (2a 2a): : In Inclusiven usiveness ess

SEN BDI BFA CIV CMR ETH GHA GMB KEN MDG MLI MOZ NGA RWA SWZ TZA UGA ZAF ZMB

• 0.10
• 0.05

0.00 0.05 0.10 0.15

• 0.05

0.05 0.1 0.15 Average annual change in log (per capita income) Average annual change in log (per capita income in poorest quintile) Sources: Chen and Ravallion (2007), and IMF, staff calculations.

• 4
• 3
• 2
• 1

1 2 3 4 5 6 Percent GDP Growth per Capita Per Capita Consumption Growth of the Poorest quartile Per Capita Consumption Growth of the Poorest quartile (using regional price deflators)

Me Medi dium um-term term Cha hallen enge ges (2b 2b): In Inclusiven usiveness ess

Source: International Monetary Fund, Regional Economic Outlook for Sub-Saharan Africa, October 2011

Per Capita a GDP Growth and Consumpt umption ion Growth of the Poores est t Quartile le

Me Medi dium um-te term rm Cha hallen enge ges (3a 3a): In Infr fras astr truc ucture ure

Normalized units Sub Saharan Africa- Low Income Countries Other Low Income Countries Paved Road Density 31 134 Total road density 137 211 Main line density 10 78 Mobile density 55 76 Internet density 2 3 Generation Density 37 326 Electricity Coverage 16 41 Improved water 60 72 Improved sanitation 34 51

Me Medi dium um-te term rm Cha hallen enge ges (3b 3b): Infrastructure - Energy

Source: World Development Indicators and IMF staff estimates. 100 500 900 1300 1700 2100 2500 2900 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 East Asia & Pacific Latin America & Caribbean Middle East & North Africa South Asia Sub-Saharan Africa

Electricity Production (kWh per capita)

Me Medi dium um-term term Cha hallen enge ges (4) 4) Structural Transformation

Source: World Bank, World Development Indicators. 100 110 120 130 140 150 160 170 180 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 East Asia and the Pacific South Asia Sub-Saharan Africa Average labor productivity in the agriculture sector (Agriculture value added per worker, constant 2000 US$, Index: 1995=100)

Thank You

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