Javier Santiso

Director

OECD Development Centre

23 April 2009

23 April 2009

Presentation to the Council

DEVDEV A policy tank for a better world

Non-OECD members

2009 - 15 members

OECD members 2009 - 23 members

Egypt

South Africa

India

Thailand

Brazil

Chile

Peru

Indonesia

Morocco

Mauritius

Romania

Vietnam

Colombia

Israel

Costa Rica

AfDB(Observer)

AEO.orgAEO.org Africa’s economic portal for policymakers

• The latest developments in Africa’s economies

• Brings together the data & research from eight years of AEO

• Interactive database of all AEO data and statistics

• Complete and updated country notes

• Promotes original research by African researchers and institutions

AfricanEconomicOutlook.org

WikigenderWikigender Promoting women’s rights online – Wikigender Africa

• Based on a ‘wiki’ model of collective publication and editorial process

• Created by women in developing countries it reflects their realities and concerns

Wikigender.org

AEOAEO Measuring Africa’s economies since 2001

• Comprehensive, independent analysis

• Short-term macroeconomic forecasts

• Special annual sectoral focus

Key financial partnerJunior partners

UNECA

Lead partner

African think tanksLocal consultants

Experts Network

1. Economic overview & annual thematic focus

2006: Transport

2007: Water and sanitation

2008: Technical & vocational skills

2009: Innovation & ICT

2. 48 country chapters

3. Statistical annex and indicators

GrowthGrowth Africa still growing despite the crisis

Source: OECD Development Centre / African Development Bank, 2009

Real GDP Growth

Δ = 7.1%

Δ = 4.6%

Δ = 3.5%

Δ = 4.8%

TradeTrade The global trade collapse is now hitting Africa

• Many African countries have been dependent on commodity exports for growth• Nominal export growth raced ahead by an annualised 34% over 2003-07• After years of boom, World Trade is expected to contract by 13% in 2009

Source: Datastream, 2009Source: African Economic Outlook, 2009

- 94% - 112%

• A cold shower for hard commodity exporters• Soft commodity exports prove more resilient

Source: OECD Development Centre, based on World Bank, 2009

TradeTrade The commodity boom is over… for now

Hard commodities Soft Commodities

Private financial flowsPrivate financial flows A global retrenchment of capital

Source: OECD Development Centre , based on UNCTAD 2009 Source: OECD Development Centre , based on World Bank, 2009

RemittancesForeign Direct investment

• Flows to Africa grew by 17% to over USD 60 billion in 2008, despite the global slowdown• Remittances to Sub-Saharan Africa are set to decline from between 4.5% to 8% over 2009• Stock markets have taken a severe hit

Stock Markets(MSCI price index local currency)

Source: Thomson Datastream 2009

Global CrisisGlobal Crisis Africa has become more resilient to exogenous shocks

• Over recent years, terms of trade improved and good macro management in many countries strengthened fiscal balances

• HIPC initiative significantly reduced debt levels and composition in many countries

• Politically more stable than in past decades

• Africa is more integrated with the world economy and less dependent on traditional OECD markets

• Governments’ efforts in nurturing private sector and enterprise resulted in steady improvements in business climate indicators

Nevertheless…

2000-05 2008(e)Fiscal balance, % GDP

-1.4 2.8

Current Account, % GDP

0.6 3.3

Total trade with China has increased tenfold in the past decade to reach USD 106 billion in 2009

2005 2008Total external Debt/GDP, % 110.6 20.8

Debt service / exports, % 20.8 4.7

Global CrisisGlobal Crisis A patchwork of impacts

Source: African Economic Outlook, 2009

• Oil exporters are taking the most severe hit

• More globally integrated economies, such as South Africa and Egypt, are strongly affected

• Low-income / non-oil exporting countries are less affected, because:

1. decrease in energy bill

2. less integration to the world economy

- 2 to- 3 %

Zero to – 1.9 %

Greater than 3 %

Increased growth between 2008-09

Growth deceleration2008 - 2009

African growth has taken a serious hit:

2008: near 6% 2009: below 3%

Global CrisisGlobal Crisis Oil exporters and importers: making a switch?

Source: African Economic Outlook, OECD, 2009Net Oil exporters: Algeria, Angola, Cameroon, Chad, Congo, Côte d'Ivoire, Congo DRC, Egypt, Equatorial Guinea, Gabon, Libya, Nigeria, Sudan

Real GDP Growth

• Oil importers are now performing better than exporters• Lower oil prices and good performance of non-mineral

exports are reversing the terms of trade shock

RisksRisks Political instability is on the rise again

Civil Tensions: occurrence of strikes, demonstrations, violence and coup d’état. Qualitative data obtained from Marchés Tropicaux et Méditerranéens.

AEO political stability indicator

Source: African Economic Outlook, 2009

RisksRisks How will the crisis impact the MDGs?

Source: African Development Bank, 2009

African Development Bank indicator of Progress Towards MDGs 2009

Policies 1Policies 1 OECD countries must not forget Africa

DAC members' net ODA 1990 – 2007DAC Secretariat simulations of net ODA to 2008 and 2010

Source: OECD DAC / DCD, 2008

Aid commitments can make the difference, particularly in times of crisis, but to maximize aid effectiveness, donors must :

• Leverage the countercyclical properties of aid• Work together to minimize aid fragmentation

Policies 2Policies 2 The emerging world is not forgetting Africa

Source: OECD Development Centre, based on China Mofcom, 2009

• While OECD countries are dealing with their downturn, emerging countries continue to invest and strengthen ties with African countries

• Africa’s emerging country partners must not sacrifice governance and poverty reduction to strategic interests

India China

Source: OECD Development Centre, based on UNCTAD, Nepgen and Jansson 2009

Significant Chinese and Indian investments in African infrastructure, up to April 2008

African innovation is building tomorrow’s Africa

ICT shows that African countries can pursue growth based on greater domestic investment and consumption, in turn reducing the impact of exogenous shocks and crises

Policies 3Policies 3

AEO 09: Innovation and ICTs• Africa has been adapting state-of-art ICTs to local customs and constraints through

incremental innovations.• Today, 4 out of 10 Africans have a mobile phone line. Africa is the fastest growing market

in the world.

• The exponential growth of ICT is enabling many African users to gain access to basic services (education, health, banking) for the first time.

• ICTs are helping to improve business environments by contributing to market development, overcoming traditional infrastructural constraints and reducing business costs.

• Policy challenges for governments: work with business to lift the hurdles to infrastructure development, improve regulation, and invest in scaling-up innovative applications for social services.

23 April 2009

Supplementary information

ThemeTheme Innovation and Information & Communication Technologies

Africa’s Exponential Growth in Mobile Telephony • Africa is the fastest growing market in the world. Today, 4 out of 10 Africans have a mobile phone line.

• The exponential growth in ICT is enabling many African users to gain access to basic services (education, health, banking) for the first time.

• ICT is a vector for innovation, stimulating of innovative products and business models.

• As an endogenous source of growth, ICT is particularly valuable in a time of external crisis.

Source: OECD Development Centre, based on Wireless Intelligence, 2009.

ICTs are helping to shape an improved business environment by contributing to market development, overcoming traditional infrastructural constraints and reducing business costs

ICTICT Policy recommendations for Africa

ICTs in Africa has proven to be an innovation frontier by combining state-of-arttechnologies with local customs and constraints through incremental

innovations.

However, there is still more to be done to deliver more and better value added services to the poorest population :

• Expensive inland high capacity networks require government support

• Governments have to ensure that wholesale price drops are passed on

• Policies on ICT and Innovation are not yet well integrated in broader development strategies: Donor targets, MDGs and PRSPs.

• With many fixed-line operators close to bankruptcy, governments must attract private investment and knowhow to the fixed-line sector by adapting convergent licensing regimes and setting symmetric regulation of termination charges.

GrowthGrowth Africa still growing despite the crisis

Source: OECD Development Centre / African Development Bank, 2008

Real GDP Growth

Real GDP Growth (%) 2000-05 2008(e) 2009(p) 2010(p)

Central 5.7 5.0 2.8 3.6

East 4.9 7.3 5.5 5.7

North 4.1 5.8 3.3 4.1

South 4.1 5.2 0.2 4.6

West 7.1 5.4 4.2 4.6

Africa 4.8 5.7 2.8 4.5

Memorandum items

North Africa (including Sudan) 4.2 6.0 3.5 4.2

Sub-Saharan Africa 5.2 5.5 2.4 4.7

Oil-exporting countries 5.4 6.6 2.4 4.5

Oil importing countries 4.1 4.6 3.3 4.5

Oil Oil ExportersExporters

The price of having all eggs in one basket

Source: OECD Development Centre / African Development Bank *: African Economic Outlook forecasts

…and little room left for manoeuvre

• Many oil exporters did not take advantage of commodity windfalls to improve governance and diversify their economies

• Nevertheless, some oil exporters have performed well in terms of lowering levels of external debt

Taking a clear hit from the oil price fall…

Oil Oil ImportersImporters

Proving resilient… so far

Source: OECD Development Centre / African Development Bank *: African Economic Outlook forecasts

Oil-importing countries have performed well, diversifying their sources of growth over recent years. While lower energy and food prices subsequent to the crisis have helped importers, difficult times lie ahead

Good performers’ strengths:• Sustained and prolonged growth • Prudent macroeconomic policies• More Diversification

Challenges:• Poor capacity in mobilizing domestic

resources• Contain fiscal and current account deficits• High dependency on ODA• Prioritise poverty reduction • Difficulty adjusting to price shocks

Holding up against the crisis so far… …yet challenges rising

Global CrisisGlobal Crisis Staggered impacts are to be expected

•Weak fundamentals and dependent on one commodity

• Guinea, Eritrea, Malawi, Mauritania, DRC

• Stronger fundamentals but dependent on one/few commodity/ies

• Botswana, Algeria, Cameroon, Rwanda, Benin

•Weak fundamentals but less dependent on one commodity

• Gambia, Liberia, Sierra Leone, Ethiopia

•Strong fundamentals and less dependent on one commodity

• Tunisia, Uganda, Kenya

Time

Macro Macro managementmanagement

Standing up well to recent OECD performance..

* Excluding Zimbabwe** Estimations for 20078and predictions for 2009/10

Source: OECD Development Centre / African Development Bank, 2008

Inflation

Current Account

Fiscal balanceAfrica

• Fiscal balances to deteriorate significantly across the continent.

Source: OECD Development Centre, African Economic Outlook, 2009

Fiscal balance

Current Account

Source: OECD, 2009

OECD economies