Addis Ababa
30 May 2008
Economists are rapidly lowering growth forecasts for Africa and urging donor countries and lending agencies to increase assistance in light of the recent sharp increases in commodity prices. As VOA's Peter Heinlein reports from Addis Ababa, the authors of a just-released economic snapshot are warning African policymakers to be cautious as they plan for the future.
The African Economic Outlook report forecasts a nearly six percent growth in the continent's Gross Domestic Product this year, continuing through 2009. The report was prepared jointly by the African Development Bank, the Organization for Economic Cooperation and Development, and the United Nations Economic Commission for Africa.
But that report was written in February. At a news conference Friday, co-author Leonce Ndikumana, the UNECA's chief of macroeconomic analysis admitted that the rapid price hikes in the past three months, combined with poor rainfall in many predominantly agricultural African regions have changed the picture considerably.
"We started working on forecasting Africa's economic performance鈥? These figures were for October, we were forecasting 6.1 percent for Africa, but then when we were finalizing the figures in February, many things had happened," he said. "So the model gave us much lower figures. I would not be surprised if we did it again now we would find much lower figures."
Ndikumana says conditions have deteriorated so rapidly over the past three months that an economic forecast done today might estimate Africa's growth as low as five percent over the coming year and a half. But he says even that reduced figure is healthy.
"Even if we have to revise the forecast, it would still give us a figure above five percent, which is good, by historical standards for African countries," he said. "Now if the oil prices keep going up...if food prices keep going up, for net food importers that's going to be a challenge. And if the rain if the weather is erratic as it has been, we would even reduce the forecast."
Ndikumana cautions Africa's economic policymakers, especially those in non-oil producing countries, to be cautious in planning for the coming months. He also urges donor countries and lending agencies to be ready to increase levels of assistance if conditions deteriorate further.
"African policy makers should be concerned about some key developments, including high oil prices, high energy/food prices and the instability of the weather, especially because of the predominance of agriculture," he said. "What we advocate for is for continued prudent policies at the national level, but we advocate for special assistance from the donor community, especially for oil importing countries, and net food importers."
There was fresh evidence Friday of the crippling effect of high oil prices on non-oil producing countries. Ethiopia's central bank reported the trade deficit had expanded 15 percent to $1.3 billion in the quarter ending in January. That deficit is likely to widen, given the sharp price increase in recent weeks.
Western economists and diplomats say the International Monetary Fund is preparing to offer Ethiopia a bridge loan of more than one billion dollars to help it through a foreign exchange crunch. News agencies have reported that imports of oil and other commodities have pushed Ethiopia's foreign exchange reserves down to worrisome levels.