afrol News, 14 May - Africa's economic activity in 2007 has risen by 5.7%, and is expected to remain high, at 5.9% in both 2008 and 2009, the 2008 African Economic Outlook reportproved.

Released by the African Development Bank Group and its partners, the report was based on a study of 35 African countries that account for some 87% of Africa's populations and 95% of its economic output.

The outlook for much of Africa continues to be highly favorable, although oil-exporting countries are outpacing others by a substantial margin.

Moreover, some countries continue to face serious problems – including the humanitarian catastrophe in the Darfur region of Sudan , the economic collapse in Zimbabwe, conflicts and political unrest in Chad , Kenya , and Somalia, which are likely to dampen their growth prospects.

This positive economic outlook has been spurred by a significant increase in official development assistance to Africa, driven largely by debt relief and emergency assistance, increasing flows of foreign direct investment and improving macroeconomic stability.

Besides, increased oil and mineral production in Southern and Central Africa and some improvements in the security situation are likely to boost growth in 2008.

The continued global expansion - albeit slowing considerably due to the fallout from the sub-prime crisis in the United States - continues to sustain demand for oil and other industrial raw materials at relatively high prices, the study indicated.

However, inflation in net oil-importing countries, excluding Zimbabwe, accelerated to 6.7% in 2007, up from 6.3% in 2006 and 5.5% in 2005, mainly due to increasing oil and food prices.

Also current account balances have deteriorated in many countries, with smaller surpluses among large exporters of oil and metal ores, while many countries were adversely affected by higher import bills despite some improvement in the prices of agricultural export products, cocoa, coffee, and cotton in particular.

"The windfall gains from commodity prices have strengthened public finances, notably in net oil-exporting countries. These gains will need to be managed carefully, with a sizeable proportion used for investment in infrastructure and human resource development to diversify the sources of economic growth which will be needed once the current commodity boom has run its course."

Net oil-importing countries face a different set of challenges. Prospects for GDP growth are quite promising in 2008 and 2009, but inflation is rising mainly due to a more complete pass-through to consumers of international oil price increases combined with increases in the international prices of grains and vegetable oils. And containing inflation to single-digit levels may well dampen growth.

The current slowdown in the United States, which spread to other countries, is capable of creating a sharp fall in the demand for African exports.

Aid levels have increased in recent years and Africa has benefited more than other regions. However, much of it has been in the form of debt relief or humanitarian assistance. It remains to be seen whether the amount of aid will continue to increase, once the temporary surge in debt relief and emergency aid has passed.

Based on recent trends, only six African countries - most of them in North Africa - are likely to meet the key target of halving poverty, a key Millennium Development Goals.

The need to promote good governance is as important as ever, wutg Ghana, Kenya, Rwanda, Algeria, and South Africa completing the AU/NEPAD African Peer Review Mechanism.

But the outlook notes that progress towards democracy has stalled recently, in spite of the fact that conflicts in some countries have started to subside.

Despite progress in macroeconomic management and the regulatory environment, more needs to be done to ensure an environment conducive to private-sector development, especially in further reducing corruption.

Although there has been recent substantial increases in Africa's global trade, intra-African trade remains limited. The value of African exports grew by 21%, reaching US $360.9 billion in 2006, mainly due to continued high commodity prices and strong world growth.

Intra-African trade accounted for less than 10% of Africa’s total exports in the same year compared with over 73% and 51% for the EU and Asia, respectively. More alarmingly, between 1996 and 2005, African exports to the world have grown faster than trade within the continent.

Addressing obstacles to intra-African trade - tariff and non-tariff barries, weak physical infrastructure, especially road and energy, and by lack of economic diversification, would help promote investment and economic diversification as well as international competitiveness in Africa.

By staff writer

© afrol News

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