The key to Africa’s immediate economic outlook is commodity demands by developed and other developing countries as China and India. To what extent could stalling economic recovery and austerity measures in the US and Europe also undermine Africa’s progress? When do states and the African continent as a whole have to turn inward to accelerate domestic demand and evolution of the legal, social and economic conditions necessary for development of an emerging middle class? Could China in particular be replacing European dominion with economic domination of its own? Economic growth in sub-Saharan Africa for 2012 is forecast to continue expansion, supported by higher commodity prices and rising export demand, according to the International Monetary Fund’s (IMF). In many of Africa’s low-income countries, growth is also being boosted by domestic demand and by adding value to exports. Fiscal & Inflationary Austerity? But the IMF’s Regional Economic Outlook for sub-Saharan Africa also cautioned that consumer price inflation is speeding up across the region, and that tighter monetary policy may be needed in some countries to head off inflation expectations. Fiscal policy may need to support tighter monetary conditions by focusing more on the medium term, the report said. Think that this would be a mistake for Africa as IMF’s implicit support for austerity in Europe and US has proven to be ill-timed. Above 5% Growth – But Critical Assumptions Re Continuing Global Economy: The outlook, released October 19, estimates that sub-Saharan Africa will grow by 5¼ percent in 2011 and 5¾ percent in 2012. However, this projection assumes that the global economy will regain some of its momentum in the coming months. If not, then Africa will not be immune and growth could falter. “Our projections are for growth in 2011 to average about 5 percent. Growth could rise to 5 and ¾ percent in 2012, partly as a result of a boost to production; one off boosts to production in some economies. But all of this is predicated on the global economy regaining momentum,” said Antoinette Sayeh, Director of the IMF’s African Department. Broadening the Wealth: In background studies published in the outlook, the IMF also highlights the quality and breadth of the region’s recent growth episode. These studies point to rising consumption by the poorest households, especially in countries where growth has been sustained at high levels, and the opportunities for intensifying trade with new growth markets. “We have some new evidence that the living standards of the poorest households in a number of the faster growing economies has increased quite significantly. We also know of course that millennium development goals have made progress in a number of countries and so those indicators, health and other outcomes that are important to the poor, are improving as well. But it’s important to say that, of course, growth is important. It’s critical to reducing poverty but is not necessarily always sufficient and countries have to pay particular attention to whether growth is in fact inclusive, and where there’s evidence that it’s not they need to then implement targeted transfer programs that help those being left out,” according to Sayeh. Supportive monetary and fiscal policies helped the region weather the 2009 global crisis in 2009 and set it on a recovery path for 2011 and 2012. Economic activity has also been driven by higher commodity prices and increased export demand, although to a varying extent across country groupings. China’s Emergence as Trading Partner: “Well, we’ve seen over the past decade a significant transformation in Africa’s trade patterns. The trade shares of the traditional partners in Africa have declined and those of the new partners such as China have increased significantly. So the export share of new partners has increased from 30 to 50 percent and the import share of those new partners from 40 to 60 percent over the last 10 years, so a significant change,” Sayeh said. That may be a mixed blessing, especially for small local farmers and industries who find themselves overwhelmed by China’s effective mercantilist style. Higher Food & Fuel Prices: In many of sub-Saharan Africa’s low-income countries, growth is being supported by buoyant domestic demand along with export diversification into higher–value added production and to fast-growing emerging markets. However, higher food and fuel prices are bringing considerable difficulties, especially for the urban poor, and drought in the Horn of Africa is imposing untold hardships on households in that region. For oil- and other resource-exporting countries, strong commodity prices are helping to support growth, the terms of trade, and foreign exchange reserves. For example, oil exporters are expected to grow b y 6 percent in 2011 and 7 percent in 2012, above the regional average. The picture is less rosy for some middle income countries, including South Africa, which have been more exposed to recent global economic and financial turmoil. The middle income countries are expected to grow by 4–4½ percent in 2011 and 2012. One of the region’s main policy challenges is the steady increase in consumer price inflation to an average of 10 percent in June 2011 against 7½ percent in June 2010. Although inflation has been driven in part by higher food prices, accelerating nonfood inflation indicates that second-round effects, such as claims for higher pay, are also taking hold. In many countries, exchange rates are also coming under significant pressure. Only a handful of countries have so far adjusted monetary policy in response to faster inflation and, even then, not decisively: in most cases, interest rates are little changed from the levels they were lowered to during the global financial crisis. Especially in countries that are running at close to capacity or where there have been serious signs of policy slippage, monetary policy needs to be tightened decisively to reduce the risks of entrenching inflationary expectations and creating unsustainable macroeconomic imbalances. Again, I would be cautious in tightening monetary policy and imposing fiscal cuts, especially in view of rising risk of global economic contraction. In spite of promising growth prospects for the region, the outlook said a note of caution is warranted in the event that downside risks to the global economy materialize according to the IMF. Indeed, the biggest threat to economic activity in the region is the strong possibility that already lower growth projections for advanced economies for 2011–12 will be revised down again. ARTICLE – “Climate Change & Development Conference/Africa” - diplomaticallyincorrecttv.com/films/blog_post/climate-change-development-conferenceafrica-by-ambassador-mo/36384 By Ambassador Muhamed Sacirbey Facebook – Become a Fan at “Diplomatically Incorrect”

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