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). Global demand for African products – especially oil, minerals and agricultural – is expected to remain upbeat, but this is contingent on successful economic recovery in major industrial countries and continued strong growth in emerging Asian economies, especially China. Moreover, delivery of the promised aid and debt relief will allow African countries to boost expenditures in key sectors including public infrastructure and social services. Furthermore, consoliOverview dation of macroeconomic management will not only reduce inflation in the short run, but also encourage private investment and strengthen growth.
Factors that are likely to hinder growth in 2007 and subsequent years include lack of diversification of production and exports and subsequent instability and vulnerability to shocks, and the increasing spread of the HIV/AIDS pandemic, which undermines labour supply and labour productivity. In addition, inefficient public infrastructure and unreliable energy supply at the national level as well as poor integration of transportation and energy network at the regional level will continue to undermine productivity and international competitiveness. Moreover, higher oil prices are a major concern for African countries, which need to continue to control inflation, promote fiscal stability, improve current account position, and increase growth.
Challenges and opportunities in development financing The past few years have witnessed encouraging developments in development financing for Africa, which should have positive impact on the continent’s growth prospects in the coming years. However, much more needs to be done in both the volume of external finance and the effectiveness in the use of these resources.
External debt remains high and private capital flows insufficient The hope that Africa’s external debt will be significantly reduced under the Highly Indebted Poor Countries Initiative (HIPC) and that economic reforms will stimulate private capital inflows has been very slow to materialize. Although Africa’s debt stock declined considerably relative to GDP, total debt service obligations remained unchanged in 2006 due to rising interest rates. The debt burden seriously constrains spending on public investment and ultimately retards growth and employment generation.
The continent has benefited from substantial inflows of external financing in the form of official development assistance (ODA) (including debt relief ), which should boost economic growth in the coming years. The Multilateral Debt Relief Initiative (MDRI) announced at the G-8 summit in Gleneagles in 2005 provided much needed relief for 13 SSA countries. However, this debt relief package is not enough and more external funding is needed to help African countries increase growth rates and achieve a meaningful reduction in poverty. Gross domestic investment remains far below the level considered necessary for Africa to half poverty by 2015. Higher external inflows will be needed to fill the chronic investment-saving gap in order to boost economic growth.
To learn more about this author, visit United Nations Economic Commission for Africa's Website.
Like this article? Share it with your friends
 |
Related Businesses - Evan Elite Authors |
|
The Evan Elite Authors program is currently in beta phase. For details please contact us.
|
|
|
United Nations Economic Commission for Africa's
Complete
List Of
African-Accounts
Articles
|
|
If you enjoyed this article, get United Nations Economic Commission for Africa's Complete List of African-Accounts Articles For FREE!
|
|
|
|
![[Get Copyright Permissions]](http://license.icopyright.net/images/icopy-w.gif){kind=small}
