RISING GLOBAL RISKS 2 A more difficult global environment, - - PowerPoint PPT Presentation

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State of the Africa Region

SUSTAINING GROWTH

AMID

RISING GLOBAL RISKS

RISING GLOBAL RISKS

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A more difficult global environment, underpinned by weak growth

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Source: World Bank DEC Global Prospect Group

Slowdown in trade

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. . . and sharply lower and volatile commodity prices, signaling the end of the commodity super cycle

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Source: Bloomberg

CHALLENGES FOR AFRICA

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Africa’s growth has been impressive, but recent growth trends are less robust

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Source: World Bank

2 4 6 8 10 12

SSA Oil-Rich Non Resource-Rich (Fast Growing) Real GDP Growth

(in %)

Average 2003-08 Average 2010-14

COMPOSITION OF GROWTH

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Source: World Bank

2 4 6 8 10

2003-08 2010-14 2003-08 2010-14 2003-08 2010-14 Sub-Saharan Africa Resource-Rich NonResource-Rich

Contribution of Economic Sectors to Growth (%) Services Resources Manufacturing Agriculture

Relative contribution of investment to growth has increased in resource-rich countries

Source: World Bank

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34 39 19 85 45 37

12 17 9 27 10 11

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2 4 6 8 10 12

2003-08 2010-14 2003-08 2010-14 2003-08 2010-14 Sub-Saharan Africa Oil-Rich NonResource-Rich (Fast- Growing)

Contribution of aggregate demand to output growth (%)

Net Exports Public Consumption Domestic Investment Private Consumption 2003-08 2010-14 2003-08 2003-08 2010-14 2010-14

Oil-Rich Sub-Saharan Africa Non-Resource-Rich (Fast-Growing)

Capital accumulation is the main driver of growth

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• 0.5

0.0 0.5 1.0 1.5 2.0 2.5 Sub-Saharan Africa Resource-Rich NonResource-Rich NonResource-Rich - Fast Growing

Source of output per worker growth, 1995-2011 (percent per year)

Capital per worker Total factor productivity

Source: Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2015), "The Next Generation of the Penn World Table" forthcoming American Economic Review, available for download at www.ggdc.net/pwt

Poverty remains high, with fragile countries sharply lagging in reducing poverty

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100 150 200 250 300 350 400 10 20 30 40 50 60 70 80 90 100 1990 2012 2012* with NGA

• No. of poor people (Millions)

Poverty headcount (%)

56 43 37 284 338 389

Note: a) 2012* with NGA = using comparable and quality data, including Nigeria b) Rest are estimates from PovcalNet database.

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Poverty headcount and number of poor

5 10 15 20 25 30

Fragile Non-fragile

Poverty reduction, 1996- 2012, in percentage points

Worsening current account balances and downward pressure on currencies

Current account balance

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Nominal exchange rate change

Source: IMF

Rising fiscal deficits are fueling the rise in debt

Fiscal deficit

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Public debt

Source: IMF

Note: Republic of Congo received debt relief in 2010

The weight of concessional debt is declining, and countries are exposed to exchange rate risk

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Source: Bloomberg

Currency composition of public debt (in % of PPG debt) Concessional debt (% of total external debt)

Yield on African sovereign debt has been increasing

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Source: Bloomberg. JP Morgan Emerging Market Bond Index Yield for Africa. This graph represents the evolution of the secondary yield of African sovereign debt

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OPPORTUNITIES FOR GROWTH IN AFRICA

Boost in rice production since 2007, largely through increasing yields

2.8 4.7 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 2000-2007 2007-2012

Milion metric ton

Rice production increase

10 20 30 40 50 60 70 80 90 100 2000-2007 2007-2012 Yield contribution (%) Area contribution (%)

Source: Seck et al. 2013

Annual yield growth 2000-2007: 0.4% or 11 kg/ha Annual yield growth 2007-2012: 5.8% or 108 kg/ha Annual yield growth Asia (1960-2010): 50kg/ha

Africa’s domestic resource mobilization is low

Source: IMF

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Tax revenues are low, with varying structures across countries

Source: IMF

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2 4 6 8 10 12 14 16

Sub-Saharan Africa Resource-Rich NonResource-Rich

Tax Revenues Composition (in % of GDP)

Taxes on International Trade Taxes on income, profits and capital gains Taxes on Goods and Services Other Taxes

Pattern of trade reveals dependence on commodities, but also opportunities

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SSA – Composition of exports, average 2010-14

Source: World Trade Integrated Solutions (WITS) database, 2015

SSA- Composition of imports, average 2010-14

% % % %

1.6% rice 12% 18% 63% 6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010-2014

Import Share (% of total goods imports) Percent

Food Fuel Manufacturing commodities Others

10% 12% 16% 49% 13%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010-2014

Export Share (% of total goods exports) Percent

Minerals and Metals Fuel Manufacturing commodities Agricultural commodities Others

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High fertility rates reduce benefits of growth

1 2 3 4 5 Low fertility countries High fertility countries Percentage change 1995-2014 average GDP GDP per capita GDP GDP per capita 1 2 3 4 5 SSA MNA SAR LAC EAP OECD ECA Total Fertility Rate (Births per woman)

Invest in human high-return capital

Few children in early child development programs despite proven high returns. Few tertiary graduates, and few of them are in STEM fields.

22 Source: African Center for Economic Transformation 2014

10 20 30 40 50 60 70 80 90

ECA LAC SSA SAR EAP MNA OECD % of children enrolled in early child education

Source: World Development Indicators

STEM Non-STEM

0% 5% 10% 15% 20% 25% 30%

15 African countries Global comparators

Percentage of population that graduates from tertiary education

Accelerate the reform agenda in energy

• Energy costs remain high
• High levels of subsidies are fiscally unsustainable
• Distribution companies are performing poorly
• Insufficient investment in maintenance
• High levels of commercial losses – a major obstacle to

private sector investment in production

• Good news -- private sector is increasingly involved in

energy production

• Need to sustain the reform agenda

CONCLUSION

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MAJOR OPPORTUNITIES DESPITE CHALLENGES

• 1. Agriculture
• 2. Revenue Mobilization
• 3. Quality of spending
• 4. Energy
• 5. Demography

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