Africa untainted by weak global recovery. (View from the City).While global economic recovery remains weak and could be wrecked if a war breaks out, Africa's growth has continued to be robust, underpinned by strong demand for oil and commodities such as cocoa.
The most striking feature of the world economy over the past year has been its feeble recovery, despite the many monetary and fiscal stimuli employed by a number of countries. Recent studies by leading research institutes, such as the International Monetary Fund (IMF IMF
See: International Monetary Fund
See International Monetary Fund (IMF). ), the Paris-based Organisation for Economic Co-operation and Development The Organisation for Economic Co-operation and Development (OECD), (in French: Organisation de coopération et de développement économiques; OCDE) is an international organisation of thirty countries that accept the principles of representative democracy and a free market (OECD OECD: see Organization for Economic Cooperation and Development. ), and the United Nations Department of Economic and Social Affairs The United Nations Department of Economic and Social Affairs (UNDESA) is part of the United Nations Secretariat and is responsible for the follow-up to the major United Nations Summits and Conferences, as well as services to the Economic and Social Council and the Second and Third (UNDESA UNDESA United Nations Department of Economic and Social Affairs ) show that global economy still remains in the doldrums.
Horst Kohler, managing director of the IMF, said: "The world is in a state of heightened uncertainty. The economic recovery that started in the major advanced economies has weakened, and while there are still reasons to see a firmer recovery down the road, that road is far from smooth. Many emerging market economies, in particular, are feeling the pain."
The OECD (the club of 30 richest nations) has also cautioned: "Forward looking indicators show that a solid recovery may be rather slow to materialise." The OECD forecast that the global economy is set to grow by between 1.7% to 2.8%, compared with 2% in 2001.
The economic downturn has affected global trade, especially since the September 11 attacks September 11 attacks
Series of airline hijackings and suicide bombings against U.S. targets perpetrated by 19 militants associated with the Islamic extremist group al-Qaeda. . According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the World Trade Organisation (WTO See World Trade Organization. ), the volume of mercantile trade fell last year for the first time in two decades, and growth in 2002 is expected at a paltry 1%. Furthermore, falling non-fuel commodity prices are damaging poorer countries, leading to severe balance of payments difficulties. This in turn, has increased funding requirements for the Heavily Indebted Poor Countries Heavily Indebted Poor Countries (HIPC) are a group of 37 least developed countries with the highest levels of poverty and debt overhang, which are eligible for special assistance from the International Monetary Fund (IMF) and the World Bank. , mostly in sub Saharan Africa.
The unbalanced pattern of economic activity has led to over-dependency upon America as the engine of world growth. Japan - still the world's second-largest economy - is suffering from prolonged deflationary conditions with lower spending, falling output, and steadily declining consumer prices. The IMF expects the economy to contract by 0.5% in 2002. It notes: "Japan appears to be emerging from its third recession in a decade, but there is no guarantee against another similarly bad decade without a determined effort to implement profound bank and corporate restructuring."
The Eurozone Eurozone
same as Euroland
Eurozone n → eurozona, zona euro
Eurozone n → zona euro remains firmly stuck in a low-growth cycle, with gross domestic product (GDP GDP (guanosine diphosphate): see guanine. ) growth anticipated at just 0.9%, its weakest performance for 12 years, reflecting the economic weaknesses of Germany, France and Italy.
Even though America's economy is faltering because of lower business investment and consumer spending, its projected 2.2% growth in 2002 still remains vastly superior to Europe. This improved US productivity is reflected in output per worker, underpinned by the high-tech boom of 1990s. An OECD report comments: "US growth was being driven by the remarkable productivity gains due to advances in technology that have made it possible to squeeze more output from the same amount of economic activity."
The near-collapse in equity prices on Wall Street has eroded the purchasing power Purchasing Power
1. The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you'd be able to purchase.
2. of people in many wealthy countries over the past two years.
NEW YEAR BLUES
2003 could again see a period of sub-par growth rather than outright global recession. The UNDESA believes that sluggish global activity may persist until mid-2003, as "low investment and slumping stock markets offset consumer enthusiasm and attempts by governments to spend their way out of the downturn." The 2003 world output growth is projected at 2.9% to 3.7%, but still below the robust 4.7% recorded for 2000.
The main risks on the horizon are geopolitical ge·o·pol·i·tics
n. (used with a sing. verb)
1. The study of the relationship among politics and geography, demography, and economics, especially with respect to the foreign policy of a nation.
a. uncertainties and threats of a second Gulf War which could cause oil supply disruptions. The industrialised Adj. 1. industrialised - made industrial; converted to industrialism; "industrialized areas"
industrial - having highly developed industries; "the industrial revolution"; "an industrial nation" world, albeit less reliant on fossil fuel compared to the 1970s, could still plunge into deep recession if crude prices are sustained at $40-$50 per barrel for six months or more. Glen Hubbard, economic adviser to President George W. Bush, warned: "Larger (price) increases pose a more substantial risk."
The developing world, especially in China and Southeast Asia, remains more vulnerable to oil shocks because of its ever growing industrial energy usage over the past three decades.
In additon the outbreak of hostilities linked to a possible US-led strike on Iraq can damage business confidence and affect future investment plans of multinationals in the Middle East and North Africa as well as in Muslim countries such as Indonesia and Malaysia.
The notion that Africa is largely semi-detached from the global economy is incorrect. Thanks to increasing market liberalisation n. 1. Same as liberalization.
Noun 1. liberalisation - the act of making less strict
alleviation, easement, easing, relief - the act of reducing something unpleasant (as pain or annoyance); "he asked the nurse across the continent, many countries' prospects are linked with developments in world trade. Africa's exports to the European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the
European Community bloc in 2001 were worth $58bn, equivalent to 46% of total exports ($125.7bn), according to Direction of Trade statistics. While exports to America and Asia (including Japan) totalled $22.3bn and $l7bn, respectively.
In contrast with turbulence in Latin America (caused by the Argentinean financial crisis), Africa has remained quite resilient during 2002, with some economies, notably South Africa, Botswana, Mozambique, Senegal, Cameroon, Ghana, Mauritius, Tanzania and Uganda, growing strongly and contributing to the general recovery of SSA's economies. But there are concerns about political-economic vulnerabilities in the principal regional economies of Zimbabwe, Cote d'Ivoire and Kenya.
Based on IMF's estimations, Africa's total output rose by 3.1% last year, equivalent to GDP per capita [Latin, By the heads or polls.] A term used in the Descent and Distribution of the estate of one who dies without a will. It means to share and share alike according to the number of individuals. growth of 0.5%. Most countries have made tangible progress towards macroeconomic mac·ro·ec·o·nom·ics
n. (used with a sing. verb)
The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. stability, in terms of declining inflation and fiscal deficits.
Commodity producing countries have had a mixed year. Oil exporters (led by Nigeria, Algeria and Angola) have enjoyed continuous windfall earnings. Nigerian Forcados crude - similar in quality to Brent blend Brent Blend
A type of sweet crude oil that is used as a benchmark for the prices of other crude oils.
The brent blend is a mix of crude oil from several facilities in the Ninian and Brent fields on the North Sea. - is likely to average about $24 per barrel. South Africa, Ghana and Cote d'Ivoire have benefited from higher prices for gold and cocoa, although sustained weakness in coffee and cotton prices have affected, in particular Uganda, Burkina Faso, Mali and Benin. In southern Africa, agricultural production fell sharply because of the recent drought.
GDP growth is projected at 4.2% in 2003, underpinned by rising commodity prices and healthy external demand, as recovery in global trade gathers momentum. World trade volume is expected to rebound to 5.7%-6.1%, representing a marked upturn over 2001/02. Africa's growth is, however, falling short of the 7% target required for sustainable development and combating poverty across various countries.
Developing Africa should increase its openness to trade and attract more foreign direct investment (FDI FDI
See: Foreign direct investment ) in order to boost long-term growth and reduce dependency on foreign aid. Total FDI inflows in 2001 were $17,165m, according to the UN World Investment Report 2002. Major recipients were South Africa ($6,653m), Morocco ($2,658m), Algeria ($l,196m), Angola ($1,119m), and Nigeria ($1,104m).
But inflows to Africa were modest compared with $102.26bn in Asia-Pacific and $85.37bn in Latin America. Higher investments into manufacturing and services industry by multinationals depend on improvements to basic infrastructure and the promotion of enlarged regional markets.
Equally important for sustainable growth is fostering good governance. A recent survey reported in BBC BBC
in full British Broadcasting Corp.
Publicly financed broadcasting system in Britain. A private company at its founding in 1922, it was replaced by a public corporation under royal charter in 1927. Business News found that corruption is costing Africa (including northern Maghreb countries) more than $148bn per annum Per annum
Yearly. . This, in turn, increases cost of goods by 20%, deters private investment and undermines growth. Empirical studies show that developed economic institutions, including the protection of property rights, democratic accountability and effective checks against bureaucratic corruption were positively related with improved economic performances across countries.
In essence, foreign support is vital for putting low-income countries on a path to socio- economic advances. It is commonly overlooked that post 1945, the reconstruction of Western Europe and Japan owed heavily to massive US investments. The international community should provide similar concrete support to the New Partnership for Africa's Development New Partnership for Africa's Development (NEPAD) is an economic development program of the African Union. The NEPAD was adopted at the 37th session of the Assembly of Heads of State and Government in July 2001 in Lusaka, Zambia. (NEPAD NEPAD New Partnership for Africa's Development ), (see African Business, May 2002). This ambitious developmental strategy calls for increased FDI and official aid, as well as better trade access to lucrative OECD markets. External resources are contingent, however, on strong commitments to economic prudence, democracy and respecting the rule of law.
Most African countries have potential for growth that could be unlocked, assuming sustained political stability and good governance. The IMF has urged rich nations to boost aid to least developed countries (LDCs) - specifically those of Africa and open their markets by phasing out trade-distorting subsidies, particularly on agriculture, textiles and labour-intensive manufactures.
High tariff barriers in the OECD regions force African countries to focus on producing raw materials, basic commodities and hence increase their exposure to volatility in international commodity markets. The Fund notes: "Better access to advanced markets would provide a critical boost to developing economy exports, supporting investment and growth which is essential for successful integration in the world economy and for poverty alleviation."
Structural reforms are not only needed in the Third World. The advanced countries also require better policy frameworks, for example, reform of the Eurozone's inflexible labour markets and strengthening corporate governance Corporate Governance
The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. in America. While Japan needs to tackle the problems of bad debts of $400bn (representing about 80% of Africa's GDP).
Africa - blessed with immense mineral and energy wealth - has vested interests in the global economy, but it should develop manufacturing industries, thus diversifying exports in order to fully participate in international trade. Increasing private investments and trade expansions are keys to future growth opportunities; however, the developed world should equally offer more technical and financial assistance to less fortunate regions.
A more equitable distribution of economic resources can contribute towards global security. World peace will be a precious gift to businesses worldwide in 2003 and beyond.