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Discussion Starter · #1 · (Edited)
Full document http://www.imf.org/external/pubs/ft/reo/2010/AFR/eng/pdf/sreo1010.pdf


Highlights:

What Are the Prospects and Challenges in the Five Largest Economies?

The five largest economies (South Africa, Nigeria, Angola, Ethiopia, and Kenya) account for two-thirds of the region’s output and just under half of its population. The group is also quite diverse, comprising a middle-income oil importer, two oil exporters (one of which is also now middle income) and two low-income oil importers (Ethiopia, Kenya) with a more diversified (but, in Ethiopia’s case, small) export base. As well, per capita incomes in the last two countries are quite different—about US$330 in Ethiopia and US$840 in Kenya. This diversity mirrors the heterogeneity of the region. All told, therefore, prospects in these five countries should be a useful proxy for trends in the region.

Among the five, only South Africa went into recession in 2009. It felt the impact of the crisis particularly strongly both because of its stronger trade and financial linkages and because the crisis hit the country after economic growth had already started decelerating. The effect was quite brutal, leading to the loss of about 1 million jobs.

Angola was also affected heavily by global developments, particularly the volatility in oil prices, and growth decelerated from more than 13 percent in 2008 to under 1 percent in 2009. The other three countries fared much better. In Nigeria and Kenya, growth actually increased slightly; whereas in Ethiopia the marginal fall still left growth at almost 10 percent.

The five countries are set to grow on average by some 5 percent this year and 5½ percent in 2011, playing off the global recovery. But this will require addressing the following challenges:

In South Africa, the growth momentum, after three quarters of acceleration, showed signs of tapering off in the second quarter of this year. Despite this, the recovery is expected to be sustained, with output growth of 3–3½ percent projected for 2010–11. In this context, the key for macroeconomic policy is to strike the right balance between supporting the ongoing recovery and strengthening policy buffers, including external reserves. Reforms to improve the effectiveness and efficiency of labor and product markets could help to raise potential growth and to make such growth more labor intensive.

In Nigeria, strong non-oil growth in recent years, in particular in agriculture, looks set to continue. GDP growth of about 7½ percent is projected for 2010–11. With growth at potential, it will be important to ensure that fiscal policy is appropriately countercyclical to avoid overheating the economy and to replenish the oil savings account.
Improvements in infrastructure and business environment can further increase Nigeria’s growth potential.

In Angola, the government’s adjustment program, supported by an IMF stand-by arrangement, has largely succeeded in restoring macroeconomic stability, following the initially destabilizing effects of the 2009 oil price collapse. Output growth is expected to approach 6 percent in 2010 and 7 percent in 2011, helped by growing oil production. Large government payment arrears to domestic contractors and suppliers has weighed on output in the non-oil sector; resolution of these arrears will be needed if growth objectives are to be realized. Further fiscal consolidation is also needed to strengthen the external position and fully stabilize the economy.

In Ethiopia, the economy has recently enjoyed strong and broad-based growth, including rising contributions from the service sectors and industry. Macroeconomic imbalances heightened sharply in 2008–09, but a strong tightening of monetary and fiscal policies since late 2009 has helped reduce inflation to single digits and rebuild international reserves. Exchange rate adjustments have also helped. GDP growth of 8–8½ percent is projected for 2010–11. Monetary policy has been recast to support remonetization. Structural reforms and liberalization will be needed to improve the business environment and secure a robust supply response from the private sector.

In Kenya, a fine line should be followed between maintaining the recovery through further fiscal stimulus measures and ensuring that there are no risks to debt sustainability. Similarly, monetary policy will need increasingly to be directed toward inflation objectives. Although growth is recovering well, it is expected to stay below its potential of 6 percent for the next two years.
So they are basically assessing growth for SSA using the data from the 5 largest countries. I didn't know this was their methodology until now.
 

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Discussion Starter · #2 · (Edited)
Continued


How Can the Region’s Five Weakest Growth Performers Sustain Recovery?

The five countries in which output actually fell between 2007 and 2009 were Botswana, Chad, Eritrea, Seychelles, and Zimbabwe. As in the case of the five largest economies, this group is quite disparate, comprising two middle income countries (Botswana, Seychelles), an oil exporter (Chad), and two fragile states (Eritrea, Zimbabwe). In aggregate they account for about 5 percent of the region’s total output and population.

With the exception of Botswana, poor policy environments before the crisis were the main sources of the drops in output, although the crisis added to countries’ difficulties. Deep-rooted policy challenges remain in a number of these countries.

In Botswana, the demand for diamonds collapsed as the global financial crisis unfolded. However, because of previously prudent policies, the authorities were able to ease fiscal and monetary policies promptly, and the nonmining sector grew by a healthy 6¼ percent in 2009. Overall, the economy contracted by 3¾ percent in 2009.
With a rebound of activity in the diamond sector and continuing strength elsewhere in the economy, activity is expected to accelerate to 8½ percent in 2010 and settle back to 5 percent in 2011. In future, public spending will need to return to a more sustainable level with an emphasis on quality and effectiveness.

In Chad, the chronically unstable security situation and poor business environment have hindered growth and poverty reduction, notwithstanding sizable oil revenues collected since 2003. Following a weak 2009, real GDP is expected to increase by 4¼ percent in 2010. To date, the oil revenue windfall has led to a weakening of public financial management practices and an unsustainable level of government spending. Medium-term fiscal policy needs to be set with an eye to the trend decline of oil resources over the next 20 years. This will require across the board improvements in public financial management practices.

In Eritrea, output fell by 10 percent in 2008 in the wake of the world food and fuel price crises and a severe drought, while inflation surged to double digits. The authorities responded by loosening fiscal and monetary policies, through increased social subsidies. The financing of large fiscal deficits, however, further stressed an already fragile banking system. With the return of rains in 2009, growth reached an estimated 3½ percent.
Economic growth is expected to remain sluggish in 2010 in the absence of key structural reforms, such as liberalization of the trade and exchange systems, a reform of the banking system, and correction of an overvalued exchange rate.

In Seychelles, the radical reform program initiated in 2008 has corrected years of policy errors and structural distortions. The outlook is positive, with GDP growth of 4–5 percent projected for 2010–11. Although the economy proved resilient to the global crisis, tourist and export earnings remain sensitive to the external environment and the threat of piracy. Building on a successful debt restructuring, and prudent fiscal and monetary policies, progress in tax reform and public enterprise restructuring will be key to securing high medium-term growth.

In Zimbabwe, a decade of incoherent economic and structural policies and poor governance resulted in a cumulative output decline of more than 40 percent by 2008, inflation spiraling out of control, and a humanitarian crisis. Since 2009, strengthened economic policies, higher commodity prices, and good agricultural seasons have underpinned economic recovery. Real GDP is projected to increase by 6 percent in 2010. Maintaining this growth momentum will require fiscal restraint, in particular with respect to the public sector wage bill, resolution of infrastructure bottlenecks, further progress in containing banking system vulnerabilities, restructuring the Reserve Bank of Zimbabwe, and strengthening property rights enforcement.
 

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Discussion Starter · #3 ·
An interesting table is the appendix on Real GDP growth.

Notice how countries who are resource poor and landlocked are set to be the 2nd fastest growing group in 2010 (6.1% vs 6.4% for oil rich countries); but are set to match the oil rich countries in 2011 (6.7% each).
 

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IMF are incredible. They say Kenyas growth will remain below 6% for the next two years. Can they REALLY predict economic growth in Africa that far ahead seeing that they always get things wrong even for the current year projections!

Even though Angola is one of the biggest economies I think it would be important for a populous and larger nation like DRC to grow.

The GDP per capita gap between Ethiopia and Kenya is very sobering and reminds us of just how far Ehiopia is behind.
 

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Discussion Starter · #5 ·
^^ Ethiopia is far behind Kenya, but we are moving ahead faster so the gap has been narrowing for the last decade. Within 10 years, we'll be neck and neck.
 

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Even though Angola is one of the biggest economies I think it would be important for a populous and larger nation like DRC to grow.
Yea, only if we had a human being central and president. Like Katanga's governor.

Not the current government filled with scums humiliating the people and the country.
 
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