State of the Africa Region S USTAINING GROWTH AMID RISING GLOBAL RISKS 1
RISING GLOBAL RISKS 2
A more difficult global environment, underpinned by weak growth 3 Source: World Bank DEC Global Prospect Group
Slowdown in trade 4
. . . and sharply lower and volatile commodity prices, signaling the end of the commodity super cycle 5 Source: Bloomberg
CHALLENGES FOR AFRICA 6
Africa’s growth has been impressive, but recent growth trends are less robust Real GDP Growth (in %) 12 10 8 6 4 2 0 SSA Oil-Rich Non Resource-Rich (Fast Growing) Average 2003-08 Average 2010-14 7 Source: World Bank
COMPOSITION OF GROWTH Contribution of Economic Sectors to Growth (%) 10 Services 8 Resources Manufacturing Agriculture 6 4 2 0 2003-08 2010-14 2003-08 2010-14 2003-08 2010-14 Sub-Saharan Africa Resource-Rich NonResource-Rich 8 Source: World Bank
Relative contribution of investment to growth has increased in resource-rich countries Contribution of aggregate demand to output growth (%) 12 Sub-Saharan Africa Non-Resource-Rich Oil-Rich (Fast-Growing) 10 9 19 10 8 27 12 11 45 6 34 37 17 Net Exports 85 4 39 Public Consumption Domestic Investment 2 Private Consumption 0 -2 2003-08 2003-08 2010-14 2010-14 2003-08 2010-14 -4 2003-08 2010-14 2003-08 2010-14 2003-08 2010-14 Sub-Saharan Africa Oil-Rich NonResource-Rich (Fast- Growing) 9 Source: World Bank
Capital accumulation is the main driver of growth Source of output per worker growth, 1995-2011 (percent per year) Capital per worker Total factor productivity 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 Sub-Saharan Africa Resource-Rich NonResource-Rich NonResource-Rich - Fast Growing Source: Feenstra, Robert C., Robert Inklaar and Marcel P. Timmer (2015), "The Next Generation of the Penn World Table" forthcoming American 10 Economic Review, available for download at www.ggdc.net/pwt
Poverty remains high, with fragile countries sharply lagging in reducing poverty Poverty headcount Poverty reduction, 1996- and number of poor 2012, in percentage points 30 100 400 389 90 350 25 284 80 300 338 No. of poor people (Millions) 70 20 Poverty headcount (%) 56 250 60 43 50 200 15 37 40 150 30 10 100 20 50 5 10 0 - 1990 2012 2012* with NGA 0 Fragile Non-fragile Note: a) 2012* with NGA = using comparable and quality data, including Nigeria 11 b) Rest are estimates from PovcalNet database.
Worsening current account balances and downward pressure on currencies Current account balance Nominal exchange rate change 12 Source: IMF
Rising fiscal deficits are fueling the rise in debt Fiscal deficit Public debt Note: Republic of Congo received debt relief in 2010 13 Source: IMF
The weight of concessional debt is declining, and countries are exposed to exchange rate risk Currency composition of public debt Concessional debt (in % of PPG debt) (% of total external debt) 14 Source: Bloomberg
Yield on African sovereign debt has been increasing Source: Bloomberg. JP Morgan Emerging Market Bond Index Yield for Africa. This graph represents the evolution of the secondary yield of African sovereign debt 15
OPPORTUNITIES FOR GROWTH IN AFRICA 16
Boost in rice production since 2007, largely through increasing yields Rice production increase 100 5 4.7 90 4.5 80 4 70 3.5 Milion metric ton 60 2.8 3 50 2.5 40 2 30 1.5 20 1 10 0.5 0 2000-2007 2007-2012 0 2000-2007 2007-2012 Yield contribution (%) Area contribution (%) 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 Source: Seck et al. 2013
Africa’s domestic resource mobilization is low 18 Source: IMF
Tax revenues are low, with varying structures across countries Tax Revenues Composition (in % of GDP) 16 Taxes on International Trade 14 Taxes on income, profits and capital gains 12 Taxes on Goods and Services 10 Other Taxes 8 6 4 2 0 Sub-Saharan Africa Resource-Rich NonResource-Rich 19 Source: IMF
Pattern of trade reveals dependence on commodities, but also opportunities SSA – Composition of exports, average 2010-14 SSA- Composition of imports, average 2010-14 Percent Percent 100% 100% 6% 13% 90% Import Share (% of total goods imports) Export Share (% of total goods exports) 90% % % 80% 80% 70% 70% 63% 49% 60% 60% 50% 50% 40% 40% 30% 30% 16% 1.6% 18% rice 20% 20% 12% 10% 10% 12% 10% % % 0% 0% 2010-2014 2010-2014 Minerals and Metals Fuel Food Fuel Manufacturing commodities Others Manufacturing commodities Agricultural commodities Others 20 Source: World Trade Integrated Solutions (WITS) database, 2015
High fertility rates reduce benefits of growth Total Fertility Rate (Births per woman) 5 4 3 2 1 0 SSA MNA SAR LAC EAP OECD ECA 5 GDP GDP 4 1995-2014 average Percentage change GDP per capita 3 2 GDP per capita 1 0 21 Low fertility countries High fertility countries
Invest in human high-return capital Few tertiary graduates, and Few children in early child development programs few of them are in STEM fields. despite proven high returns. 90 % of children enrolled in early Percentage of population that 80 graduates from tertiary education 70 child education 60 50 15 African countries 40 30 20 Global comparators STEM Non-STEM 10 0 0% 5% 10% 15% 20% 25% 30% ECA LAC SSA SAR EAP MNA OECD 22 Source: World Development Indicators Source: African Center for Economic Transformation 2014
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 24
MAJOR OPPORTUNITIES DESPITE CHALLENGES 1. Agriculture 2. Revenue Mobilization 3. Quality of spending 4. Energy 5. Demography 25
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