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2.4 Growth prospects for 2007 and the medium-term outlook: Economic Report on Africa 2007

Guest post by: United Nations Economic Commission for Africa

Article Overview: 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).

2.4 Growth prospects for 2007 and the medium-term outlook: Economic Report on Africa 2007

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.

Related Articles
  1.8 References: Economic Report on Africa 2007
  4.0 Diversification trends in Africa: Economic Report on Africa 2007
  References: What Drives China’s Growing Role in Africa?
  V. D. The Future of China-Africa Economic Relations: FACTORS INFLUENCING THE GROWING TIES
  Least Developed Countries Report, 2007

Article Tags: Africa, Africa, African countries, Central Africa, East Africa, Economic growth, growth rates, growth rates, macroeconomic management, North Africa, oil prices, Southern Africa, West Africa



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