69
34
CAN AFRICA C LAIM TH E 21
ST
CENTURY?
countries suffered sharp declines in commodity prices. Oil exporters felt
a massive terms of trade loss, but until late 1999 many oil importers were
cushioned from the immediate effects of their slumping export prices by
lower costs of oil imports (box 1.4). Even so, they faced intensified com-
petition in depressed primary export markets. Another factor was the
intensification of conflict in Central Africa, in parts of West Africa, and
in the Horn of Africa with the resumption of war between Ethiopia and
Eritrea. While many countries continued to grow strongly in 1998, the
region’s population-weighted growth slumped, leaving little growth space
to cut poverty. Growth appears to have picked up in 1999 and 2000,
though not to the peak levels of 1996, and sharp increases in fuel prices
shifted terms of trade losses back to oil-importing countries.
Reform and recovery.
Macroeconomic and structural reforms in Africa
have been highly controversial.
2
Some studies using information through
the mid-1990s failed to find a link between reform and performance.
Perhaps this is not surprising. It is not easy to disentangle the relative con-
tributions of external developments, domestic economic policies, and
deeper institutional factors over the long run, because they work together.
Nor is evaluation easy in the medium run, because of lagged effects and
T
HESWINGINTHECURRENTACCOUNTSOF
E
AST
A
SIAN
countries in 1998 sent a massive deflationary shock
through the global economy—equal to 3 percent of
world GDP. But except for South Africa, which suf-
fered from a speculative currency attack, Africa was less
exposed to international capital movements than many
other developing regions. The main transmission
effects from the Asian crisis were through a halving of
growth in world trade and 20–40 percent declines in
terms of trade for primary products.
The net effects were felt sharply by African oil
exporters, which suffered a terms of trade loss of 7 per-
cent of GDP. While other countries also suffered losses
(particularly those exporting metals and tobacco),
until late 1999 most were shielded from the immedi-
ate effects of export price declines by sharp cuts in their
oil import bills. The net effect of the crisis—coupled
with increased conflict, adverse weather in East Africa,
and political uncertainty in Nigeria—pulled growth
down in Africa, especially in larger countries.
The longer-run impact of the crisis will be felt more
widely. Second rounds of commodity price declines are
hitting some producing countries severely. Oil prices
doubled, benefiting producers but hurting importing
countries. World trade growth may be slower than
anticipated, and competition will come from other
regions where exchange rates have depreciated sharply.
For example, processed fish from Thailand has made
severe inroads on Senegal’s exports. Investors may also
show less interest in projects to extract and process raw
materials. Thus all the more pressing is the need to boost
Africa’s international competitiveness.
Source:World Bank 1998b.
Box 1.4 The East Asian Crisis and Africa
Macroeconomic and
structural reforms in
Africa have been highly
controversial
