Amid continued uncertainty about the prospect of a global economic meltdown a report authored by two of Africa's key economic institutions offered mixed projections on the continent's growth in the near future.

Released at a time when many leaders of African countries, including Ethiopia, have altered their predictions of strong growth and instead are pronouncing that their countries are suffering, the report describes the continent as being austerely affected by the downturn.

Despite the global economic crisis, five East African countries, including Ethiopia, are projected to maintain moderately robust growth in 2009 and 2010, according to the report presented at the UN Conference Centre (UNCC) last Wednesday, June 24, 2009.

The 2009 African Economic Outlook (AEO), co-produced by the United Nations Economic Commission for Africa (UNECA), the African Development Bank (AfDB), the Organization for Economic Cooperation and Development (OECD), said Ethiopia, Rwanda, Sudan, Tanzania and Uganda will have healthy economic growth in 2009 and 2010.

These countries had the fastest growing economies in east Africa in 2008. Their growth is projected to be sustainable because their major exports are likely to remain insulated from the brunt of the meltdown.

"The demand for their [the five countries] major agricultural and horticultural exports is less sensitive to the effects of the crisis," reads the regional overview part of the report.

Ethiopian officials have recently said they expect about 10pc growth this year against the previous prediction of 11.2pc that they have maintained for a long time despite significantly lower predictions by international financial institutions. For example, the International Monetary Fund (IMF) has predicted 6.5pc growth for Ethiopia.

The average growth rate for East Africa was projected to be 7.3pc in 2008, down from a very strong 8.8pc in 2007. The region's performance is expected to slow to 5.5pc in 2009 and remain about the same in 2010.

This year's AEO, which has covered 47 countries, up from 35 last year, suggests that following half a decade of above five  per cent average economic growth, the continent can expect only 2.8pc in 2009, less than half of the 5.7pc expected before the crisis.

Nevertheless, the AEO anticipated growth recoiling to 4.5 percent in 2010. The non-oil producing economies in the continent are likely to better maintain growth as they are better in sustaining and diversifying their economies than the oil exporters, according to Mahamat Abdoulahi, who presented the report representing the Trade, Finance and Economic Development Division of ECA. 

Oil-exporting countries are expected to see their growth fall to 2.4pc in 2009 compared to 3.3pc for the net oil importers.

The authors' of the 2009 edition of the AEO find the collapse of commodity prices and plummeting demand from OECD countries will have an adverse effect on Africa's budget balances, with the regional budget deficit for 2009 predicted to be around 5.5pc of GDP compared to a surplus of 3.4pc predicted in the AEO one year ago. Foreign direct investment decreased by about 10 per cent in 2008.

The 2009 AEO also finds that while official development assistance (ODA) increased in 2008, there are concerns over downward pressure on donor aid budgets due to the revolving economic crisis.

Yet, the economists in Africa's key institutions believe that the continent is still likely to achieve a robust growth in the coming years but that depends on a number factors including the response to the ongoing crisis from developed economies and the level of ODA the continent gets. 

For most of the 1970s and 1980s, growth in Africa was largely constrained by internal factors.

Decades of reform addressed most of the internal factors. Combined with a favourable external environment, Africa enjoyed half a decade of growth rates above five per cent. Perhaps because the continent is more integrated to the global economy no that then, the economic crisis has eroded benefits accumulated over the years of reform. The more affected countries from the continent are those more integrated to the West like Egypt and South Africa, according to the authors.

With a projected growth rate of only 2.8pc, and a bias on the downside, many people will fall back into poverty.

In fact there were experts from international cooperation organizations at Wednesday's presentation of the report who argued that even the economic benefits harvested in the good seasons have not helped many Africans come out of poverty.

"Why has  the economic growth not in the past five years reduced poverty in Africa? Poverty is still at highest rate," querried an expert from the Italian Development Cooperation. 

The fallback to poverty is a setback beyond the control of Africans and is likely to be protracted, according to the AEO. The Outlook also reports that only a handful of African countries are on track to meet the target of halving the share of the population living on less than one dollar a day by 2015.

Still on a positive note, the 2009 AEO states that Africa is better positioned to endure the crisis than it was ten years ago. Many countries have undergone prudent macroeconomic reforms in the past few years which have strengthened fiscal balances and reduced inflation to single-digit levels. Many have also benefited from substantial debt relief, with the result that debt service/export ratios are low in most countries.

Nonetheless, there are big disparities in the performance of each region in the continent.

In sharp contrast to the prospects of East Africa, economic growth in Southern Africa is expected to slow dramatically in 2009 to 0.2pc against 5.2pc in 2008 and seven per cent in 2007. But it will recover to 4.6pc in 2010.

The growth of the regional as well as continental driver, South Africa, is expected to fall to 1.1pc due to the impact of the crisis on demand for its mineral exports compounded by a contraction in private consumption and investment, according AEO.

Average GDP growth in North Africa, which was expected to improve slightly from 5.3pc in 2007 to 5.8pc in 2008, is expected to slow significantly in 2009, to 3.3pc before increasing to 4.1pc in 2010. All North African countries will grow more slowly in 2009, due to cutbacks in oil production and tourism receipts. Morocco and Tunisia have more diversified production and exports that make these countries less vulnerable to the reduction in demand resulting from the crisis, but growth will slow there as well.

Real GDP growth in West African countries is projected to slow to 4.2pc in 2009, from 5.4pc in 2008 and 2007, before strengthening to 4.6pc in 2010. Projections for 2009 indicate a slowdown in Nigeria's growth rate to four per cent, as a result of the OPEC quota on oil production and declining investment. Most of the other countries in the region are also expected to experience slower growth in public and private investment associated with lower commodity prices and remittances. Liberia and Sierra Leone, however, are expected to continue to enjoy high growth rates as output recovers after years of conflict.

In 2008, average GDP growth in the seven countries of Central Africa was registered at five per cent, up from four per cent in 2007. In 2009, it is expected to slow sharply to 2.8pc and increase to 3.6pc in 2010. Reduction in demand for oil and minerals will undermine growth in resource-rich countries.

The 2009 AEO focuses on innovations in information and communication technologies (ICTs). Despite low penetration rates for new technologies, innovative applications of ICT have been proliferating to areas such as e-banking, e-payments, e-agriculture, e-trade, e-government and e-education, the report concludes.

By OMER REDI
FORTUNE STAFF WRITER