Last week Africa Economic Outlook launched its report for 2012. We here publish what the report says about the foirt Mano River Union countries
Sierra Leone
Sierra Leone’s GDP growth accelerated in 2011 and the outlook is positive for 2012 and 2013. Growth is mainly driven by mining sector activities and the new discoveries of iron ore mines aided by policy that will boost the economy.
Governance has improved in recent years following the implementation of the National Anti-Corruption Strategy (NACS).
Although there have been some improvements, the country’s social indicators are amongst the lowest in the world and further efforts are needed to meet the Millennium Development Goals (MDGs).
Overview
Real gross domestic product (GDP) growth increased from 5% (excluding iron ore) in 2010 to 5.7% in 2011 and is projected to rise gradually to 6.2% in 2012 and 2013 driven by recovery in the mining sector. According to International Monetary Fund (IMF) projections, new iron ore exploration planned for 2012 should result in a one-time expansion of real GDP growth (including iron ore) of 51.4% this year. Growth is expected to stabilise around 10.2% in 2013.
Despite this growth performance, inflation rose to 18.1% in 2011 in response to high international oil and agricultural prices on the one hand and the depreciating Leone (SLL) on the other. The rate is expected to fall to 11.7% in 2012 and to 9.4% in 2013, as a result of improvements in domestic agricultural production, the introduction of the new goods and services tax (GST) and the slower rate of currency depreciation. Nevertheless, pressures on prices will remain a challenge because of the removal of fuel subsidies which, along with the rise in royalties on diamond production, have led to an improvement in the overall fiscal balance (including grants) from -6.4% of GDP in 2010 to -5.3% in 2011. Corrective actions that have been taken in 2011 to strengthen fiscal discipline will help to reduce the fiscal deficit to 4.5% and 3.6% in 2012 and 2013. However, the current account deficit has grown from 18.3% of GDP in 2010 to 55.7% in 2011, owing to a rise in imports of machinery for the mining sector. The current account deficit is projected to stabilise at around 9.9% in 2012 and 9.6% in 2013 because of a substantial increase in exports of minerals and cash crops.
The tightening of fiscal and monetary policy will also help Sierra Leone to manage its debt sustainability better. Furthermore, strong reforms aimed at reducing corruption, providing free health care and improving the decrepit transport, power and public health infrastructures top the list of the government’s priorities. As a result, the country is ranked as one of the world’s top reformers by the 2012 World Bank’s Doing Business index.
Youth unemployment is a challenging social problem in Sierra Leone. The country’s youth unemployment rate of 60% is amongst the highest in the West African sub-region. In the context of the second Poverty Reduction Strategy Paper (PRSP II) for 2008-2012, the government has implemented new legislation for youth-friendly initiatives that aim to provide an environment conducive to youth development, employment and empowerment.
Liberia
Liberia’s economy continued its post-war expansion in 2011, exporting its first iron ore since the conflict, and growth is expected to continue in 2012 and 2013, buoyed by increasing iron-ore, rubber, timber, and palm-oil exports, and continuing foreign direct investment.
The government is improving public-sector efficiency and transparency by implementing a public financial-management-reform strategy and installing information-management systems, but developing and sustaining human and institutional capacity remains a challenge.
President Johnson Sirleaf won a second six-year term in open elections in November 2011, but disturbances surrounding the run-off highlighted the fragile political and social situation, with an underemployed, largely unskilled young population waiting to see gains from the post war recovery.
Overview
Liberia’s economy recorded its eighth consecutive year of post-war growth in 2011, expanding by an estimated 6.9% in the year. This was driven by the first iron-ore exports since the end of the war, strong rubber exports, and increased timber production. Foreign direct investment (FDI) in mine construction, rubber and timber exports, and recent investments in palm-oil plantations will contribute to growth in the coming years. GDP growth is expected to increase to 8.8% in 2012 due to the first full year of iron-ore exports, and to moderate to 7.2% in 2013.
Liberia is in transition from post-conflict reconstruction to medium-term growth and poverty reduction and is preparing its second medium-term growth and development strategy for 2012-2017, in line with a long-term strategy that envisions becoming a middle-income country by 2030. Long-term growth is expected to be driven by natural-resource extraction, but to avoid the enclave-sector growth of the past that contributed to the conflict, the country must enable broad-based growth and increased employment creation. The government has simplified procedures for starting businesses and has improved access to credit, but the general business climate remains difficult and development is constrained by poor energy infrastructure and transport, especially in rural areas. The country needs to increase the overall capacity of the labour pool and achieve a better match between workers’ skills and private-sector demand. Liberia is susceptible to external factors including global iron-ore, rubber, and rice price shocks and the potential for reductions in FDI and donor contributions.
President Ellen Johnson Sirleaf won a second six-year presidential term after two rounds of elections in October and November 2011, but the second round was boycotted by the opposition and her party will be a minority in the legislature. Disturbances surrounding the second round of elections highlighted the continuing political and social fragility and an enduring need for inclusive political dialogue, increased security, improved social welfare, and employment creation. The government has improved its efficiency, transparency, and accountability through public financial management reforms and the introduction of information-management systems, but institutional capacity is still weak. Although the country has made strides in improving youth literacy and preventing and treating infectious diseases, it still faces some of the highest maternal mortality rates in the world and access to sanitation facilities is very low, especially in rural areas. Free public education is now provided for grades one to nine, but quality must improve at all levels, and the private sector should be involved in curriculum development.
Guinea
Guinea’s economy expanded 4% in 2011 and is expected to grow slightly faster in 2012 (5.1%) and 2013 (5.5%). But this depends on the success of the democratic transition, national reconciliation and structural reforms.
Reforms to stabilise the economy continue slowly, with tighter monetary and budget policy, helped by solid mining activity and revived agricultural production.
A third of young Guineans are jobless. Political instability, recent slower economic growth, inadequate policies to help young people and the gap between their training and the economy’s needs have helped worsen unemployment and under-employment among them.
Overview
After years of heavy-handed government and political instability, Alpha Condé was elected president in December 2010, but the social and political climate is still tense, with disagreement about further elections and financial and logistical problems. Additional friction in the army led to an attempt to kill the president on 19 July 2011. Legislative elections have now been set for 8 July 2012.
Despite all this, the economy advanced in 2011, with real gross domestic product (GDP) up 4%, thanks to revived agriculture, better mining output and a robust construction sector, after the return to constitutional government. Growth should hold in the short term and be 5.1% in 2012 and 5.5% in 2013.
Inflation remained very high in 2011 (21.2%) despite a strict budget policy and continuing efforts to curb credit. It should drop to 16.7% in 2012 and 10.1% in 2013.
Public finance management is based on the principle of a single account and cash-based budget execution. The budget deficit was fairly high (13.8% of GDP in 2011) even with a tight budget policy. This strictness significantly reduced current spending (to 17.7% of GDP), while total revenue increased slightly (to 16.9% of GDP) due to better tax collection. The budget deficit should continue to shrink in the short term, to 8.1% of GDP in 2012 and 6.6% in 2013.
To mop up excess liquidity and to slow growth of the money supply, the central bank (BCRG) in 2011 increased the required minimum reserve rate for banks and their intervention rate to 22%. The country’s foreign exchange reserves were the equivalent of 5.4 months of imports.
Guinea has a young population like all African countries, with more than 74% of the population aged below 35. Unemployment is mainly urban and especially affects graduates and those between 20 and 29. In the capital, Conakry, and major towns, more than two-thirds of higher education graduates under 30 are unemployed. This is partly due to a lack of government jobs and few opportunities in the formal private sector and has been aggravated by political instability, slower economic growth and inadequate policies to help young people, among other factors.
Côte d’Ivoire
With real GDP contracting by 5.9% in 2011, the economy of Côte D’Ivoire was hard hit by the negative effects of the post-electoral crisis. The substantial growth rates forecast (8.6% and 5.5% respectively, for 2012 and 2013) depend upon peace being consolidated and productive capacities being restored.
Reaching these levels of growth means accelerating the reforms set out in the Extended Credit Facility (ECF) 2012-14 which aim to improve governance and the business environment and boost performance in the financial, energy and coffee-cocoa sectors, but also bringing to a successful outcome political dialogue on reunification and reconciliation.
The mismatch between training and employment and the weakness of the job prospecting system comprise obstacles to the promotion of youth employment in Côte d’Ivoire and are hampering efforts to lift human development levels and reduce poverty.
Overview
The post-election crisis had a serious impact on the economic, social, security and humanitarian situation in Côte d’Ivoire, resulting in a pronounced fall in real GDP (-5.9%). A gradual recovery of the economy is expected in 2012 if the security situation continues to normalise, peace continues to be consolidated, the business environment improves and efforts to restore productive capacities are pursued and backed by incentives for the private sector. The economy’s recovery should lead to an 8.6% rise in real GDP in 2012, driven by significant demand for public sector investment and by buoyant conditions in the secondary and tertiary sectors. Growth should reach 5.5% in 2013.
The overall budget deficit should increase to 2.8% of GDP, compared with 2.5% in 2011, due to maintenance of lower taxation of oil revenues and a rise in current expenditure. Inflation is projected at 3.6% in 2012 and 3.1% in 2013, compared with 4.9% in 2011, thanks to better market supply fluidity and the stabilisation of oil product prices. The surplus on the current account should reach 3.7% of GDP in 2012, versus 3% of GDP in 2011, despite a decline in the trade balance, thanks to a reduction in the service account deficit and and increases in factor income and current transfers.
In the medium term, overall macroeconomic policy will come under the 2012-14 economic and financial programme which is supported by the Extended Credit Facility (ECF) of the IMF. Its implementation should enable Côte d’Ivoire to reach the completion point of the Heavily Indebted Poor Countries (HIPC) initiative in 2012 and benefit from the Multilateral Debt Relief Initiative (MDRI). Attainment of macroeconomic goals depends upon the acceleration of reforms aimed at improving governance and the business environment, and better efficiency in the financial, energy and coffee-cocoa sectors.
On the political front, institutional normalisation, the strengthening of the democratic process and progress towards reunification and reconciliation attest to a newly restored social peace. Still, consolidating and maintaining this peace by reinforcing dialogue and improving the security environment pose major challenges for the country.
Efforts to boost youth employment face several obstacles, including a gap between training and employment opportunities and a poor employment prospecting system. The goals of the youth employment schemes implemented in Côte d’Ivoire have not been reached due to the decade-long crisis from which the country has been suffering. The AGEPE employment agency (Agence d’étude et de promotion de l’emploi) lacks resources to carry out its mission. Projects aimed at boosting youth employment through the development of labour intensive work opportunities and the provision of financial aid to help young people create businesses are being reactivated.
Culled from africaneconomicoutlook.org
