Word Economy

The world economy continued to improve in 2000. Global output exceeded the earlier forecast of 3.5 per cent and grew by 4 per cent, the strongest ever achieved in more than two decades. This improvement was not only impressive, but also widespread in all major regions of the world. According to United Nations Department of Economic and Social Affairs (UN-DESA) , only four countries namely, Côte d'Ivoire, the Democratic Republic of Congo, the Republic of Moldova and Zimbabwe, experienced a fall in gross domestic product (GDP) in 2000. Figure I summarizes world output growth rates by main economic groupings in 1998-2000.

FIG. I
WORLD GDP GROWTH RATES, 1998-2000

Among the major factors that contributed to the increase was the rise in aggregate demand in international trade and improved commodity prices particularly oil prices, which had more than doubled over the course of 1999 and continued to climb in 2000. World exports increased by 10.6 per cent compared to 5.8 per cent in 1999. Global demand from developed economies increased by 8.8 per cent, while that of developing economies increased by 15.7 per cent. Among other factors, which contributed to the up-turn of the world economy was the expansion of the European Union member States with the economies of countries in the Euro economic space growing by 3.5 per cent in 2000 as compared to 2.4 per cent in 1999.

Investment in information and communication technology (ICT) and related processes, robust consumption spending and increased exports bolstered economic performance in most developed economies in 2000. Germany, for example, increased by 3.1 per cent from 1.5 per cent the previous year. Japan's economy grew significantly by 1.4 per cent from 0.2 in 1999, while the USA grew by 5.1 per cent in 2000 as compared to 4.2 per cent in 1999.

With respect to the emerging market countries of East and South-East Asia, the upturn was testimony to the resolute actions by policymakers to deepen reform efforts in response to the sharp decline of capital inflows experienced during the1997-1998 financial crises. In East Asia, for example, there was a resumption of confidence in the financial systems leading to remarkable recovery of the economy at 7.2 per cent compared to 5.9 per cent in 1999. In Latin America and the Caribbean, reforms by Brazil managed to lessen the severity of the downturn and prepared the foundation for recovery in that subcontinent, and the overall GDP growth averaged 3.9 per cent compared to 0.3 per cent in 1999. Within the global context, African economy also showed signs of recovery, with a marginal increase in growth rate from 2.8 per cent in 1999 to 3.2 per cent in 2000.

The positive turnaround of the global economy should be viewed in the context of serious challenges facing most of the economies that rely heavily on the commodity market developments. One such challenge was the more than doubling of oil prices to more than US$25 per barrel, since the third quarter 1999, mainly due to production curbs by the Oil Producing and Exporting Countries (OPEC) and other producers.

With regard to non-fuel commodities, on average, prices rose by 46 per cent from mid-1993, and dropped by 30 per cent in late 1999. The production of many commodities continued to increase rapidly, however, leading to a price cycle. The cycle in primary commodity prices was driven by changes in global demand, weather related supply shocks and technological innovations that have reduced production costs.

Metal and mineral prices tended to be driven by the changes in world industrial production, which since the last quarter 1999 continued to push down metals prices, which by mid-2000 had dropped by 4.2 per cent. The price of gold, for instance, dropped by 5.9 per cent reaching its all time low at US$266.20 per oz. This drop followed the suspension of forward sales by major producers and the attempt by Central Banks in Europe and the International Monetary Fund to auction off their gold reserves. This downward trend was, however, reversed towards the end of 2000 by cuts in production as in the case of copper, and supply disruption as in the case of nickel.

Africa Economy

Economic performance in Africa in 2000 was modest compared to other regions of the world. Africa's growth rate at 3.2 per cent, was the third in the world after USA at 5 per cent and the Euro zone at 3.4 per cent. Developing countries as a group registered a growth rate of 5.6 per cent in 2000 compared to 3.5 per cent in 1999.

This expansion was led mostly by growth in export earnings of the region's oil exporting countries as a result of the increase in oil prices to more than US$25 per barrel, since mid-1999. A recovery of demand for some non-oil commodities in Asia and Europe improved export earnings in other countries. Sound macroeconomic policies and favourable domestic economic environment, coupled with good weather conditions, also contributed to Africa's improved growth performance in 2000. On average, the volume of African exports increased by 4.7 per cent from -1.7 per cent in 1999. Exports from non-oil exporting countries were also slightly higher than the 1999 rate. Figure II shows economic performance in Africa by sub-regions in 1998 -1999, the latest period for which figures are available.

Figure II
Africa GDP Growth Rates by Subregion, 1998-1999

Increased domestic and foreign investment also contributed to GDP growth rate in several African countries including Equatorial Guinea, Libya, Mauritius, South Africa and Zambia, countries which have made significant progress in either maintaining stable money-supply growth, low inflation or lowering fiscal deficits. In addition, privatization and market liberalization policies opened up opportunities for strong private sector with large projects such as the Maputo Corridor (between Mozambique and South Africa), offering some solutions to Africa's pressing infrastructure needs.

South Africa, the largest economy in the region, for example, regained its growth momentum after two years of decline caused by the turbulence of the Asian financial crisis and export recovered with the strengthening of the world demand. Currency depreciation, high domestic interest, escalating inflation and consumer reluctance observed in the latest part of the 1999 were reversed by mid-2000 as international investors responded positively to the sound macroeconomic management followed in the country.

Despite these positive global developments, external debt servicing continued to impose additional downward pressures on economic activity in the region. This demonstrated once again the fragile nature and external dependency of the African economies.

Average agricultural output increased by 2.3 per cent in 2000 as a result of improved weather and crop growing conditions, in sharp contrast to previous two years. This provided additional stimulus to GDP growth in most countries. Nevertheless, some countries continued to face exceptional food emergencies. The worst affected included Angola, Burundi, Democratic Republic of Congo, Eritrea, Ethiopia, Sierra Leone, Somalia and the Sudan, all of which are suffering from the impact of war or civil conflicts. Others, like Kenya, Madagascar and Tanzania were hard hit by drought and/or cyclones.

© UNECA SRDC-SA 2001

Main Menu