African economies are forecast to grow by an average of 5.8% in 2007, according to the latest edition of the Economic Report on Africa (ERA 2007), the annual flagship publication of the United Nations Economic Commission for Africa (ECA), which has been launched Tuesday April 3rd.
The report, titled “Accelerating Africa’s Development through Diversification,” notes that African economies continued to sustain the growth momentum of previous years, recording an overall real GDP growth rate of 5.7% in 2006. 28 countries recorded higher economic growth rates in 2006 than 2005.
According to the report, Africa’s recent growth performance was underpinned by improvements in macroeconomic management in many countries as well as strong global demand for key African export commodities, resulting in high export prices, especially for crude oil, metals and minerals.
Factors that are likely to hinder growth in the future include lack of diversification of production and exports as well as instability and vulnerability to shocks, and the increasing spread of the HIV/AIDS pandemic, which undermines labour supply and labour productivity. In addition, inefficient public infrastructure and unreliable energy supply at the national level as well as poor integration of transportation and energy networks at the regional level will continue to undermine the productivity and international competitiveness of African economies.
ERA 2007 finds that the diversification process in Africa is highly influenced by investment, per capita income, and the degree of openness of trade, macroeconomic policy stance and the institutional framework. Based on these findings the report recommends several strategies to promote diversification in African economies.
Diversification policies for Africa can operate at three levels: macroeconomic policies to support diversification; trade and sectoral policies to deepen diversification; and strengthening institutions to enhance diversification efforts. Flexible macroeconomic policies that especially allow countries to achieve high levels of public investment are key to a successful diversification agenda. In addition, African countries need to increase financing for research and development to encourage innovation, increase productivity, and accelerate economic growth.
The 2007 edition of ERA is produced in partnership with the African Union Commission for the first time. It thus gives a truly African perspective on the performance of African economies and the key development challenges faced by the continent. The report seeks to generate constructive debate on effective strategies for addressing these challenges.