Africa is expected to grow at a rate of 5.8 per cent in 2007, slightly higher than the rate recorded in 2006 (5.7 per cent) (figure 2.8). Positive growth rates are projected for all subregions led by North Africa (6.6 per cent), East Africa (6.0 per cent), Southern Africa (5.4 per cent), West Africa (4.9 per cent) and Central Africa (3.5 per cent). Despite deceleration of growth in major industrial economies, global demand for African products, especially oil, minerals and agricultural commodities, is expected to remain steady due to strong growth in emerging Asian economies, especially China. Moreover, delivery of the promised aid and debt relief will allow African countries to boost expenditure in key sectors including infrastructure and social services. In addition, consolidation of macroeconomic management will not only reduce inflation in the short run, but also contain long-term inflation expectations, which will encourage private investment.
A number of factors are likely to hinder growth in 2007 and subsequent years.
Economic growth in many countries will be compromised by the increasing spread of the HIV/AIDS pandemic, which undermines labour supply and labour productivity.
Lack of diversification of production and exports constitutes an important source of potential instability and vulnerability to shocks emanating from changes in commodity demand and prices as well as from unpredictable weather changes.
Inefficient public infrastructure and unreliable energy supply at the national level as well as poor integration of transportation and energy networks at the regional level will continue to undermine productivity and international competitiveness, ultimately slowing economic growth (UNECA 2006b). Moreover, higher oil prices are a major concern for oil-importing African countries in terms of controlling inflation, promoting fiscal stability, improving the current account position, and increasing growth.
Achieving and sustaining high growth rates in Africa require a new approach to growth policy. Despite efforts in macroeconomic and financial sector reforms over the past decades, the majority of African countries have been unable to achieve and sustain the growth rates required for achieving the MDGs. Domestic financing constraints are compounded by the high external debt burden, which undermines any gains from macroeconomic reforms, especially in terms of trade liberalization.
In addition to pursuing macroeconomic stability, it is critical for African countries to adopt a more strategic approach to growth policy, identifying the binding growth constraints and the activities and sectors that are potential sources of job creation and growth. This strategy should also establish incentive mechanisms to channel resources to these activities and sectors.
To learn more about this author, visit United Nations Economic Commission for Africa's Website.
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