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Guest post by: United Nations Economic Commission for Africa Become an Author

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Developments in the world economy have important implications for African economies
through various channels, including demand for African export commodities,
the impact on the trade balance and the cost of external borrowing (via world interest
rates). These developments are influenced by monetary, fiscal and trade policies
adopted by major industrialized countries as well as by exogenous events such as oil
price shocks.

Growth in the world economy remains dominated by the Asian economies, which
continue to grow at more than 8 per cent per annum. In contrast, growth in advanced
economies remains modest and is yet to reach the pre-2001 level. Key constraints to
growth include the massive global macroeconomic imbalances along with tight macroeconomic
stances in advanced economies, which prevent demand-led recovery.
High oil prices also undermine growth in both advanced and developing countries
through high production costs.

Some positive developments in the world economy are likely to sustain growth in
African countries. These include high export prices for export commodities due to
high demand especially from Asia, delivery of promised aid and debt relief, and
rising inflows of foreign direct investment (FDI) with an increasing share coming
from China and India, and higher inflows of workers’ remittances. However, these
developments need to be supported by adequate domestic pro-growth policies to
maximize the gains from increased external resources.

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