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Euro crisis to impact heavily on ODA to Africa

         Date: 2012-03-28

           Tag: Euro, Africa

Summary: According to the report, Southern Africa's overall output expanded by 3.8 percent in 2010, with considerable variations in the sub-region.

Among the most severely affected EU countries in the crisis, Ireland and Portugal had over 80 percent and 60 percent of their ODA channeled to Africa in 2007-2009, respectively, while France also directed 63 percent of its ODA to Africa in the same period, the report says.

 The Euro crisis is expected to weigh heavily on Official Development Assistance (ODA) to Africa because the European Union (EU) is the largest aid provider to the continent, an Economic Report on Africa 2012, released by the UN Economic Commission for Africa (ECA) Tuesday, warns.

The report, “Unleashing Africa’s Potential as a Pole of Global Growth,” released at the ongoing meeting of African Finance Ministers in Addis Ababa, Ethiopia, notes that a handful of countries, such as France and Italy, had already reduced bilateral assistance to Africa because of the global economic crisis.

“Africa may face decreased FDI (Foreign Direct Investment) from both the EU and other parts of the world in the short term because of the sovereign debt crisis and resultant slowdown in global growth,' it says.

According to the report, Southern Africa's overall output expanded by 3.8 percent in 2010, with considerable variations in the sub-region.

South Africa, whose greater integration with the global markets makes it more valuable to external shocks, recovered rather slowly, growing by only 3.1 percent in 2011 from 2.8 percent in 2010.

Its growth reportedly was lifted by recovery of consumer spending, in turn fuelled by cheap credit and low inflation.

Botswana, Mozambique and Zambia were cited to have achieved solid growth and had growth of above 6 percent, reflecting rising mining output and strong global demand for minerals and, in the case of Zambia, bumper harvest.

Growth in Angola and Zimbabwe surpassed 4.0 percent, driven by increased oil output and investment (Angola) and by an improved political and economic climate (Zimbabwe).

The report however notes that high levels of unemployment, particularly among youth, remain.

North Africa seems the most affected, with unemployment estimated at 9.8 percent in 2011, against 7.9 percent for the rest of Africa.

“A positive portrayal of Africa in international circles is encouraging, but the Economic Report on Africa 2012 presents a more cautious and nuanced analysis of the continent’s growth trajectory,” ECA Executive Secretary Abdoulie Janneh and African Union Commission chairperson Jean Ping said in a joint message.

Trade is expected to be the most prominent channel of the debt crisis’ impact on Africa. In 2010, Africa’s merchandise exports to the EU represented 10.3 percent of its GDP and 36.2 percent of its total exports, the report states.

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