The slowdown in the euro zone economy in 2011 is expected to deepen in 2012, with recent evidence indicating that the debt ridden single currency bloc is in a «mild recession”. Historical evidence shows that recessions tend to bring about protectionist policy measures as a means to cushion against the impact of external shocks.

Free and transparent political elections, which permit citizens to effectively express their will and participate in the governance of their country, form an important part of sound democratic institutions.

Africa’s integration into the global economy is relatively low compared with other developing regions. This could be an impediment to the region’s continued and sustainable economic growth over the long run. As much as trade encourages competitiveness, enhanced competitiveness can in turn increase the level of trade with the rest of the world by raising the standards of product quality and facilitating access to new and larger markets. Moreover, better competitiveness may also attract foreign direct investment and other forms of capital flows seeking enhanced returns and greater diversification.

Following a decade of average increases in real GDP exceeding 5%, African economies are expected to sustain high levels of economic growth over the next decade boosted in part by domestic demand due to a steady increase in private and public investment1. In turn, rising real incomes will lead to higher consumer spending which is projected to almost double in the next decade. A growth of 4.5% in per capita GDP compounded annually through 2015 would result in an increase of more than 35% in consumer spending in Africa2. Although the expansion in consumer spending will be led by South Africa and Nigeria, the two largest economies in Africa, which account for 51 percent of Sub Saharan Africa expenditure, emerging markets across the continent are also making their mark.

In spite of good macroeconomic performance over the past decade, inflation in four leading East African economies – Ethiopia, Kenya, Tanzania and Uganda – has risen sharply. The inflation rate in Ethiopia was nearly 40 percent in October 2011 before leveling off to 32 percent in January 2012. Although inflation in Uganda decelerated to 25.7 percent in January 2012 from a high of 30.4 percent in October 2011, it is still far higher than expected, compared to the 3 percent rate at the end of 2010.