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AfDB Chief Economist Addresses Seminar on “Looking Beyond Financial Crisis”
African Development Bank (AfDB) Group Chief Economist, Louis Kasekende, recently visited Ivory Coast to attend the 18th Annual Meeting of the African Capacity Building Foundation (ACBF) Board of Governors hosted by the Ivorian government. Mr. Kasekende made a presentation on the theme: “Africa: From Crisis to Sustained Growth - Looking Beyond the financial Crisis.” Jointly organized by the AfDB and the Ivorian Centre for Economic and Social Research (CIRES), the seminar brought together researchers, civil society organizations, policy-makers, representatives of the international community in Abidjan and the media.
In his presentation, the AfDB chief economist noted that on the eve of the financial crisis, the mood on the continent was upbeat. The continent was in the middle of a commodity and capital inflows boom, inflation was in single digits, fiscal balances were positive for a significant number of countries and, overall, poverty levels were on the decline. Africa was enjoying the longest period of uninterrupted economic growth since independence. Underpinned by decades of reforms, domestic policy factors were beginning to show up as important drivers of economic growth. Foreign investors began to see the continent as an attractive destination, encouraged, among other things, by the continent’s macro-economic stability.
The situation has, however, changed following the advent of the crisis, though not all countries have been affected the same way. The hardest hit countries have been energy- and mineral-exporting countries. Agricultural-resource-based countries have fared much better. This suggests that while domestic policy factors have become important, natural resources are still the major sources of Africa’s economic growth. The continent’s overall real GDP growth closely tracks that of natural resource-rich countries. The simple correlation coefficient between the GDP growth rate for natural resource-rich countries and that of Africa was 0.92 for the period 2000-2008, while for natural resource-poor countries, it was only 0.46 for the same period. Africa’s growth is thus cyclical, characterized by growth accelerations and decelerations.
As we address the challenges posed by the crisis, there is a need to balance short-term options with long-term development challenges. Africa faces many challenges that were there before the crisis and will be there after the crisis. These include the high cost of doing business on the continent, managing natural resources, reforming the financial sector, large gaps in infrastructure and logistics, including ports, roads, energy, IT, lack of product and market diversification, and high levels of poverty. In his presentation, Mr. Kasekende emphasized three areas that required attention: (i) increasing the level and productivity of investment by investing in infrastructure, skills development (education and health), in IT and R&D; (ii) integrating further into regional and global markets as well as promote diversification of products and markets; and (iii) deepening economic and institutional reforms. He reiterated the Bank’s readiness to assist countries address both short-term actions as well as longer term development challenges.