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Abidjan, 24 May 2010 - The African Economic Outlook (AEO) says that 80 percent of the 50 African countries covered by its annual report of 2009 registered positive growth.
The report launched on Monday 24 May 2010 in Abidjan as part of the ongoing Annual Meetings of the Africa Development Bank (AfDB) says that in most African countries the gross domestic product continued to grow in 2009.
It however notes that in 10 of the 50 countries covered in the report, output declined while in half of the countries, per capita GDP stagnated or fell.
The report notes that African governments could promote growth through greater domestic investment and consumption.
One strategy is to adopt sustainable fiscal policies that increase government revenue and create an attractive environment for investment. Another is to eliminate bottlenecks for the domestic private sector, it says.
It notes that Information and Communication Technologies (ICTs) could play a powerful role by overcoming traditional infrastructure constraints and reducing business costs.
The report advises African governments to preserve gains obtained in the recent past by pursuing structural reforms, infrastructure development and poverty reduction.
They will have to balance these efforts with the preservation of macroeconomic fundamentals (public expenditure streamlining, real exchange rate depreciation to reinstate competitiveness, and inflation control), it said.
It further notes that some governments are opting to maintain law and order without shifting to authoritarianism and that the challenge would be to continue against a background of dwindling public resources and uncertain donor support.
Palliative solutions may come from improved governance and transparency through regular electoral consultations and reforms in public administration, it says.
The report, however, warns that the initial effects of the crisis would be felt through trade due to a fall in commodity prices and plummeting demand from developed countries.
In fact, many of the new export industries in Sub-Saharan Africa are at risk of collapsing. Workers’ remittances, trade finance and Foreign Direct Investments are also expected to dry up, posing grave risks to balance of payment sustainability. Nonetheless, the reorientation of trade towards emerging markets, prudent macroeconomic reforms and debt relief makes Africa better placed to weather the crisis compared to 10 years ago, the report states.
The report notes that donor countries have generally maintained their aid flows to Africa despite substantial fiscal pressure at home and that debt relief under the Heavily Indebted Poor Countries Initiative by the IMF and the World Bank has reduced debt service costs.
This, together with additional loans by the IMF, the World Bank and the AfDB has helped African countries to better cope with the crisis, Another positive factor was that due to past fiscal prudence and to disinflation, many African countries could pursue expansionary fiscal and monetary policies which mitigated the downturn, it said.
It predicts a gradual recovery of African economies with average growth reaching 4.5 percent in 2010 and 5.2 in 2011.
All African regions will achieve higher growth although the recession will leave its mark. Southern Africa, which was hardest hit in 2009, will recover more slowly than other regions. East Africa, which best weathered the global crisis is likely to again achieve the highest average growth in 2010-2011, the report adds.