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.
To learn more about this author, visit United Nations Economic Commission for Africa's Website.
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