Development Centre

African Economic Outlook 2004/2005: Country Highlights

 

Algeria

  • Economic performance in 2003/2004 confirmed the positive results achieved in recent year.
  • The economy remains vulnerable to price fluctuations in the oil and gas sector.
  • A substantial increase in public investment has helped to reduce unemployment.

Angola

  • Offshore oil production, which dominates the national economy, performed exceptionally well in 2004 (daily production reached 1 million barrels for the first time in 2004) as new oil fields came on stream.
  • Angola must channel resources into poverty reduction and infrastructure reconstruction.
  • There have been some improvements in macroeconomic fundamentals, but more progress is needed to achieve transparency of oil revenues.

Benin

  • Since 2003, the economy has weakened due to import restrictions imposed by Nigeria, the decline in competitiveness of the port of Cotonou and the crisis in the cotton sector.
  • The cotton sector, which provides income for more than two million people and is the country’s main export, is undergoing a major crisis owing to difficulties in the liberalisation of the sector at a time of low world prices.
  • Presidential elections in March 2006 have given rise to a wait-and-see attitude on the part of the business sector hindering the pursuit of structural reform.

Botswana

  • One of the best-performing economies in Africa over the past 35 years has obtained the highest sovereign credit rating reflecting a sound management of its large diamond resources, a commitment to democracy, and effective anti-corruption policies. 
  • The country has to  diversify its economic base, as diamond production nears full capacity and HIV/AIDS epidemics threaten to undermine past economic gains.

Burkina Faso

  • Exceptional growth in 2003 (8 %) returned to more modest (ie long term) levels in 2004 (4 %).
  • The fall in world cotton prices in 2004 is a source of uncertainty for growth.
  • The continued vulnerability of the economy to external shocks underlines the lack of progress made in diversifying the economy.
  • Progress in health and education provision is inconsistent with the amount of financial resources devoted to the sector by the government with the support of donors.

Cameroon

  • Profligacy prior to the 2004 elections led to another postponement of the target date for the HIPC completion point.
  • Economic growth has been dynamic over recent years, averaging 4.5 %, but businesses are strongly penalised by lack of legal and judicial protection.

Chad

  • Strong economic growth (31.3 % in 2004) is boosted by activity in the oil sector.
  • Government resources dried up in 2004, due to the non-disbursement of scheduled budget aid, but the situation should be alleviated in 2005 following an agreement with the IMF.
  • The crisis in Darfur is causing regional insecurity but should not affect the country’s economic activity.

Congo

  • Links have been restored with the international financial community (notably through an IMF programme, an agreement with the Paris Club of lending nations and talks with the London Club).
  • There have been improvements in the transparency of the oil sector (EITI).
  • However, social indicators remain poor owing to successive conflicts – 70 % of Congolese live below the poverty line.

Congo, Rep. Dem.

  • Peace has largely returned but some conflict zones persist in the east of the country.
  • Economic policies supported by international financial institutions are beginning to show results, restarting growth.
  • The top priorities are preserving political stability, improving governance, fighting corruption and pursuing structural reforms.

Côte d’Ivoire

  • The continuing political crisis has resulted in a substantial worsening of the social and economic situation.
  • The increased tension resulted in a further drop in activity in 2004, numerous job losses and the interruption of economic programmes financed by development partners.
  • The peace plan negotiated by South African President Mbeki may be the last chance for normalising the political situation and improving the economic outlook.

Egypt

  • Growth has revived since mid-2003 driven by improved external competitiveness.
  • The economy is going through an important phase of economic reforms.
  • The government faces two major economic challenges: an increase in unemployment and a large public debt.

Ethiopia

  • Economic activity has strongly rebounded, following two years of drought.
  • Ethiopia, one of the least developed countries in the world, remains highly dependent on external aid.
  • The full resolution of the conflict with Eritrea on border demarcation needs to be secured for the country to sustain economic growth and poverty reduction.

Gabon

  • The government began reforms and a policy of stabilisation in 2003 which led to agreement with the IMF in 2004.
  • Diversification is essential to compensate for reduced oil production.

Ghana

  • Prudent macroeconomic policies and strong agricultural performance, have sustained steady economic growth. Growth should reach 6% in the next two years boosted by bumper crops for cocoa.
  • Structural reforms have improved the business and regulatory environment.
  • Growing youth unemployment (from 10.4% in 2000 to 12.2% in 2003) represents a major challenge to social cohesion.

Kenya

  • Transport, Communication and Tourism are driving a modest rebound in economic activity (3.5% in 2004/05 and 3.9% in 2005/06).
  • Structural reforms and good governance are needed to sustain broad-based growth.
  • Challenging social problems require accelerated restructuring of expenditures towards poverty reduction programmes and development expenditure.

Madagascar

  • Macroeconomic stability and robust growth have been re-established after the sever weather and sharp depreciation of the currency (50 % against the euro) of the first half of 2004.
  • There has been some progress in the reform of public enterprises and in the fight against corruption.
  • The HIPC completion point was reached in October 2004. This should help in the fight against poverty which currently affects 80 % of the population of Madagascar.

Mali

  • Growth fell in 2004 (2.2 % compared to 7.4 % in 2003) because of unfavourable terms of trade and bad weather. It should recover in 2005, but lower world cotton prices will continue to affect production as well as public finances in 2005 and 2006.
  • The liberalisation of the cotton sector has been postponed to 2008.The peaceful political and social climate and well-oriented public policies received the support of donors at the Geneva Round Table Conference.

Mauritius

  • The country has undergone a deep transformation over the last 25 years from a mono-crop (sugar) production into a diversified economy built on five pillars: sugar, export processing zones (EPZ), tourism, financial and communication services.
  • Solid growth (4.3% in 2004), stable and democratic political regime, and strong high quality institutions make Mauritius the only country in Sub-Saharan Africa to be on track to meet the MDGs.
  • Mauritius now faces substantial new challenges in adapting to the impending loss of trade preferences in sugar and textiles, while reducing unemployment and fiscal imbalances.

Morocco

  • Significant progress has been made in democratisation and in the fight against social and regional disparities.
  • The economy is enjoying good growth (3.5 %) and increased macroeconomic stability.
  • More efforts will be needed to reduce poverty and the dependence of the economy on the agricultural sector.

Mozambique

  • Continued high economic growth (7.8% in 2004) has been spurred by large foreign ventures (the “mega-projects”), but obstacles to private sector development need to be removed to sustain broad-based growth and reduce poverty.
  • Poverty has decreased from 70% in 1996/97 but more than 50% of the population still live in absolute poverty and income and wealth inequalities remain pervasive.
  • President Guebuza, elected in December 2004, has placed the fight against poverty, corruption and crime at the centre of his political manifesto.

Niger

  • Drought and a locust invasion seriously affected the economy in 2004 emphasising its vulnerability.
  • The HIPC completion point was reached in April 2004.
  • President Tandja, re-elected in 2004, declared his intention to pursue and reinforce economic reforms in 2005 and 2006.

Nigeria

  • The adopted comprehensive strategic plan addresses Nigeria’s deep-rooted economic and structural problems.
  • Macroeconomic performance (4% in 2004, following 10% in 2003) has been satisfactory due to high oil prices and prudent policies. Growth is expected to hold up in 2005 and 2006, aided by improved investment levels.
  • Poverty remains widespread (over 70% in 2003 from an average of about 27% in the 1980s) in spite of enormous oil wealth.

Rwanda

  • Economic performance was not helped in 2004 by adverse weather conditions.
  • Reaching the completion point under the HIPC initiative in April 2005 gives a window of opportunity to increase economic activity and advance towards the MDGs.
  • Consolidation of the peace process in the Great Lakes region will be critical to achieve sustained growth.

Senegal

  • Good macroeconomic performance in 2003 and 2004 and well-oriented economic policies over recent years enabled the country to reach the HIPC completion point in April 2004.
  • Senegal must modernise its economy, particularly in agriculture.
  • Fiscal management should be made more transparent.
  • The country’s dynamic growth is not creating enough jobs in the formal sector and its impact on poverty is limited.

South Africa

  • Growth regained momentum in 2004 (3.8%) as the South African economy adjusted to the strong rand. Strong domestic demand and a favourable external environment are expected to bring growth to an average of 4% over the next two years.
  • A successful macroeconomic stabilisation policy has provided room for more spending on  social services. Social (disability and children) grants were provided to close to 9 million people by the end of September 2004.
  • South Africa still faces widespread poverty (exceeding 50%), a high prevalence of HIV/AIDS (20% of adult population), and an exodus of skilled labour from social services.

Tanzania

  • Sustained strong economic performance (6.4% in 2004) and high levels of donor support (more than 30% of budget revenue) offer the opportunity to break out of poverty.
  • Steady macroeconomic policies in the run-up to the elections and improved business environment are key to promoting broad-based growth and further reduction in poverty.

Tunisia

  • Strong economic growth over the last few years should be reinforced in 2005 and 2006.
  • More efforts should be made to prepare the country to meet the challenges of diversification and economic competitivity following its opening to the world market.

Uganda

  • Prudent macroeconomic policies are paying off in steady economic growth (5.9% in 2004) and high levels of donor support (more than 35% of total budget revenue).
  • The ban on multiparty politics and two-term presidential limit are expected to be lifted prior to the 2006 elections.
  • Poverty is on the rise (8.9 millions of Ugandans were poor in 2003 compared to 7.2 millions in 2000).

Zambia

  • Zambia achieved its fifth consecutive year of solid growth (5.1% in 2004) as a result of strong copper output and exceptionally good agricultural performance. Strong GDP growth is expected to continue over 2005-06.
  • The country remains highly vulnerable to climatic and commodity prices shocks.
  • The HIPC completion point for debt relief was achieved in April 2005, building on the macroeconomic stability successfully attained in 2004.
  • The run-up to the 2006 elections will test the sustainability of government policies and macroeconomic stability.

 

African Economic Outlook 2004/2005

OECD Development Centre and African Development Bank
Available in print (paperback) and electronic format (pdf)
540 pages, OECD, Paris 2005
OECD Code 41 2005 01 1 P1
ISBN 92-64-01000-9
www.oecd.org/bookshop
sales@oecd.org

 

 

 

 

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