Africa Opportunities and Challenges Roger Nord Kampala, July 2013 - PowerPoint PPT Presentation

Africa – Opportunities and Challenges Roger Nord Kampala, July 2013

Ou Outl tline ine • The Growth Take-Off in Sub-Saharan Africa • The Economic Outlook for SSA in 2013-14 • Short-term Risks and Medium-term Challenges

Per er Cap apita ta GDP: : Ke Keep eping ng Up Wi p With th Oth ther er Reg egion ons International Comparisons: GDP per Capita ( Index 1995=100 In real US dollar ) 300 Sub-Saharan Africa Middle East and North Africa 250 Central and Eastern Europe Developing Asia Sub-Saharan Industrial countries Africa Western Hemisphere 200 SSA (non-resource GDP) 150 100 50 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

400 India, 1982 ASEAN-5, 1973 Vietnam, 1990 350 Real GDP per capita (Index, Takeoff = 100) Uganda, 1986 Tanzania, 1995 300 Mozambique, 1992 Rwanda, 1995 250 200 150 100 50 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Years after takeoff Sources: IMF, World Economic Outlook . Excludes China for presentation purposes, as China's growth is much higher than that for the other countries. ASEAN 5 = Indonesia, Malaysia, the Philippines, Singapore and Thailand. 4

Wha hat t Is Is Not ot Drivi ving ng Growth owth (1) 1): : Endo En dowme ment nt an and G d Geo eogr grap aphy hy Sub-Saharan Africa: Real GDP per Capita Growth (Annual Percent) 5 1980 – 94 1995 – 2010 R esource 4 Sub-Saharan intensive Africa N on-resource Landlocked 3 Non-oil 2 1 0 O il- N on-resource -1 exporting Coastal -2

Wha hat t Is Is Not ot Drivi ving ng Growth owth (2) 2): Nat atura ural Res esou ources rces (excluding Equatorial Guinea from resource-rich) GDP per Capita (Index 1995=100) 150 SSA Resource-Rich (excl Equatorial Guinea) SSA not-Resource-Rich SSA LICs Resource-Rich SSA LICs not-Resource-Rich 125 100 75 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

Wha hat t Is Is Not ot Drivi ving ng Growth owth (3) 3): : Te Terms ms of of Tr Trad ade Sub-Saharan Africa: Terms of Trade (Index, 1995 = 100) 300 250 High-growth resource-rich High-growth 200 non-resource-rich Medium- growth 150 Low-growth 100 50 1985 1990 1995 2000 2005 2010

Wha hat t Has as Hel elpe ped d (1) 1): Disi sinflati nflation on Sub-Saharan Africa: Inflation (Percent) 40 40 High-growth non- 35 35 Resource-rich High-growth 30 30 resource-rich 25 25 20 20 Medium- 15 15 growth 10 10 5 5 Low-growth 0 0 1985 1990 1995 2000 2005 2010

Wha hat t Has as Hel elpe ped d (2) 2): : Ex Externa ternal l Deb ebt Sub-Saharan Africa: External Debt (Percent of GDP) 200 175 Low-growth 150 125 100 High-growth non-resource-rich 75 50 High-growth Medium- resource-rich 25 growth 0 1985 1990 1995 2000 2005 2010

Wha hat t Has as Hel elpe ped d (3) 3): Res eserves erves International reserves 35 35 (Percent of GDP) 30 30 High growth 25 25 resource rich 20 20 High growth Medium nonresource rich 15 15 growth 10 10 Low growth 5 5 0 0 1985 1988 1991 1994 1997 2000 2003 2006 Source: IMF, African Department database.

Wh What at Ma May Hav ave e Hel elpe ped d (1) 1): Cha hang nging ng tr trad ade e Pat atte terns rns 100 100 Exports Imports 90 90 80 80 Percent of total exports Percent of total imports 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 DAC member countries India Sub-Saharan Africa China Brazil Others Source: IMF, Direction of Trade Statistics. 11

Wha hat t Ma May Hav ave e Hel elpe ped d (2) 2): Risi sing ng Ai Aid d In Infl flows ows 10.0 4.8 9.9 log of aid to SSA 4.7 9.8 (Constant 2005 dollars, left scale) 9.7 4.6 9.6 9.5 log of SSA real 4.5 per capita income 9.4 (Right scale) 9.3 4.4 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Sources: Roodman (2006), and IMF, staff calculations.

Wha hat t Ma May Hav ave e Hel elpe ped d (3) 3): : Pol oliti tica cal/Structural l/Structural Ref efor orm Constraints on Chief Executive (Rank, 1=low, 7=high) 5 High-growth non-resource-rich 4 3 Medium- growth 2 High-growth resource-rich Low-growth 1 1985 1990 1995 2000 2005 2010

Ou Outl tline ine • The Growth Take-Off in Sub-Saharan Africa • The Economic Outlook for SSA in 2013-14 • Short-term Risks and Medium-term Challenges

Glob obal al Con onte text t 1: 1: Mu Multi ti-Spee Speed d Grow owth th Real GDP Growth, selected countries/groups (Percent) 7.0 6.0 Average 2010-12 5.0 Average 2013-14 4.0 3.0 2.0 1.0 0.0 United States Euro area Japan Emerging Market and Developing Economies 15

Glob obal al Con onte text t 2: 2: Im Impr prov oving ing bu but bum t bumpy py World Commodity Prices, 2007 – 14 World: Growth Prospects, 2006-2014 250 7 50 percent confidence interval 70 percent confidence interval 6 90 percent confidence interval 200 5 Baseline Index, 2005=100 4 150 3 100 2 Food 1 Metals 50 Petroleum Agricultural raw materials 0 0 -1 2007 2008 2009 2010 2011 2012 2013 2014 2006 2007 2008 2009 2010 2011 2012 2013 2014 • Commodity prices projected to ease somewhat • Short- term risks, especially “tail risks,” are receding; medium -term risks persist • Monetary stimulus in advanced economies — liquidity for frontier countries? 16

Growth owth in S n Sub ub-Sa Saha haran ran Af Africa ca to to rem emai ain n str tron ong Selected Regions: Real GDP Growth 2007 – 14 Sub-Saharan Africa: Real GDP Growth, 2007 – 14 14 14 World Oil Exporters 12 12 Developing Asia Middle-income countries Sub-Saharan Africa Low-income countries 10 10 Poercentage change Fragile countries Percentage change 8 8 6 6 4 4 2 2 0 0 -2 -2 -4 -4 2007 2008 2009 2010 2011 2012 2013 2014 2007 2008 2009 2010 2011 2012 2013 2014 • Domestic demand, especially investment, and exports (including owing to new capacity to produce minerals) expected to lead growth • MICs negatively affected by slow Europe and labor unrest in South Africa • Fragile countries set to outperform average SSA 17

Ri Rising ng inves estm tment ent remains s driver r of growt wth Sub-Saharan Africa: Investment, 2010 – 14 30 28 26 Percent of GDP 24 22 20 Oil exporters 18 Middle-income countries Low-income countries 16 Fragile countries 14 2010 2011 2012 2013 2014 18

Ou Outl tline ine • The Growth Take-Off in Sub-Saharan Africa • The Economic Outlook for SSA in 2013-14 • Short-term Risks and Medium-term Challenges

Sh Shor ort-term term Risks ks 1: 1: Th The gl e glob obal al ec econ onom omy Euro area downside scenario : Sub-Saharan Africa: Real GDP growth in alternative scenarios, 2013-18 • Lower investment in the euro-area 7.5 periphery Baseline 7.0 Euro area downside … • Global output and commodity prices 6.5 6.0 persistently lower than the baseline Percent 5.5 • SSA’s growth persistently reduced by up 5.0 4.5 to ¼ percentage point 4.0 Emerging markets downside scenario : 2013 2014 2015 2016 2017 2018 7.5 • 10 percent fall in investment in BRICs 7.0 plus South Africa in 2013 6.5 6.0 • Global output and commodity prices Percent Baseline excl. South Africa 5.5 significantly lower than the baseline in 5.0 Emerging markets downside 2013, recovering subsequently 4.5 scenario excl. South Africa 4.0 • Growth in SSA (excluding South Africa) 2013 2014 2015 2016 2017 2018 reduced by ½ percentage point in 2013 20

Sh Shor ort- term Risks 2: Debt levels fell … Sub-Saharan Africa: Density of Total Public Debt, 2000-12 240 Mean 200 Percent of GDP Interquartile 160 range 120 Median 80 40 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: IMF, DSA database; and IMF staff calculations. Note: For any given year, the "box and whiskers" plot (or boxplot) summarizes the distribution, during that year, of debt to GDP for 44 countries in sub-Saharan Africa (outliers not shown). Debt to GDP ratios pertain to public sector debt as defined in the Debt Sustainability Framework. • Based on the DSAs, public debt levels have fallen sharply since 2000. • External debt relief through HIPC and MDRI reduced debt levels by about 50 percent of 2012 GDP. • The decline in debt levels was halted by the global recession. 21

Shor Sh ort- term Risks 2: … but are now rising Sub-Saharan Africa: Public Sector Debt in 2012 and Sustainability Thresholds, PRGT-Eligible Countries exporters Cameroon Chad Oil Congo, Republic of Nigeria Cape Verde countries income Ghana Middle- Lesotho Senegal Zambia Benin Burkina Faso Ethiopia Low-income countries Gambia, The Kenya Madagascar Malawi Mali Mozambique Niger Rwanda Sierra Leone Tanzania Uganda Burundi Central African Rep. Fragile countries Comoros External Congo, Dem. Rep. of Côte d'Ivoire Domestic Guinea Calibrated threshold Guinea-Bissau Liberia DSF threshold São Tomé & Príncipe Togo 0 10 20 30 40 50 60 70 80 90 Percent of GDP 22