Transcript WB ADB annual transport meeting 2005

Impact of High Oil Prices on Africa
2nd Meeting of the Infrastructure Consortium for Africa,
Addis Ababa,19-20 June 2006
June 2006
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Outline
I.
Evolution of the price of oil
II. Expected Impacts
III. Policy Implications
IV. Conclusion
June 2006
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Trends in price of crude oil
• The price of oil is expected to remain high because of
Asia’s strong economic performance.
June 2006
• Between 1990 and 2003, the demand for oil grew by 7%
annually in China and India and by 1.3% in the world.
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Impacts of high oil price on
.
Growth
Inflation
Fiscal Balance
External financing gap
Terms of Trade
June 2006
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Impact on Growth: Oil exporters key beneficiaries
1997-2003
2004
2005(e)
2006(p)
2007(p)
Oil-exporting countries
4.7
6.0
5.5
6.9
6.3
Non-oil-exporting countries
2.9
4.7
4.4
4.9
4.8
Region
Source: AEO 2005-06; (e) estimates; (p) projection.
June 2006
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Considerable variations among the oil
producing countries
Oil Exporting Countries
Total Africa
7
Real GDP Growth
(%)
Performance of oil producers
Angola
Congo
Sudan
Equat. Guinea
Chad
Algeria
Egypt
Nigeria
Libya
Tunisia
Cameroon
Gabon
6
5
4
3
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
0
5
10
15
Real GDP Growth 2005
20
(%)
Source: African Economic Outlook 2006
June 2006
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But some oil importers performed better than
expected
Best Performers in 2005
Oil Importing Countries
(%)
5
Mozambique
Tanzania
Ethiopia
Ghana
Uganda
Oil exporters
Burkina Faso
Mali
Senegal
South A frica
Kenya
Zambia
Madagascar
Oil importers
4.5
4
3.5
3
2.5
2
2007
2006
2005
2004
2003
2002
2001
2000
0
5
Real GDP Growth 2005
10
(%)
Sources: African Economic Outlook 2006
June 2006
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Thanks to rising commodity prices and increased
production
Petroleum
Gold
Copper
Aluminium
280
240
200
160
120
80
Ja
n06
Ju
l-0
5
Ja
n05
Ju
l-0
4
Ja
n04
Ju
l-0
3
Ja
n03
Ju
l-0
2
Ja
n02
Ju
l-0
1
Ja
n01
Ju
l-0
0
Ja
n00
40
Sources: African Economic Outlook 2006
June 2006
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Increase in nflation (in percentage points)
June 2006
0
Eritrea
Tunisia
Mozambique
Uganda
Central African Rep.
Seychelles
Benin
Rwanda
South Africa
Guinea-Bissau
Lesotho
Cape Verde
Niger
Guinea
Burkina Faso
Ethiopia
Zambia
Tanzania
Senegal
Mauritania
Malawi
Zimbabwe
Botswana
Gambia, The
Togo
São Tomé &
Comoros
Madagascar
Mali
Morocco
Namibia
Djibouti
Sierra Leone
Kenya
Ghana
Burundi
Mauritius
Swaziland
Impact of Oil Price Increase on Inflation in 2005
4
3
2
1
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Increase in Inflation (in percentage points)
June 2006
0
Libya
Egypt
Nigeria
Algeria
Angola
Sudan
Congo, Republic of
Gabon
Cameroon
Côte d'Ivoire
Congo, Dem. Rep. of
Chad
Equatorial Guinea
Impact of Oil Price Increase on Inflation in 2005
(for net oil exporting countries, based on shares of oil in GDP)
3
2
1
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Inflation Effects ...
Africa: Inflation
(Consumer Price Index, Percent) - 1997-2007
14.0
12.0
10.0
Percent
12.0
10.7
11.2
9.7
9.5
7.9
8.0
10.3
7.5
8.2
7.3
6.5
6.0
4.0
2.0
20
05
(e
)
20
06
(p
)
20
07
(p
)
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
0.0
Years
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Fiscal Balance:
Oil importers recording deficits
Region
19972003
2004
2005e
2006p
2007p
Oil-exporting countries
-1.2
1.9
6.4
7.0
5.9
Non oil-exporting countries
-3.1
-2.6
-2.4
-2.7
-2.7
Total
-2.2
-0.5
2.1
2.3
1.8
Source: AEO 2005-06; (e) estimates; (p) projection.
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Overall fiscal position …
Africa: Fiscal Balance
(As % of GDP) - 1997-2007
3.0
2.3
2.0
2.1
0.0
-0.2
-0.5
-1.0
-2.0
-2.4
-2.0
-3.0
-1.9
-2.5
-3.0
20
05
(e
)
20
06
(p
)
20
07
(p
)
20
04
20
03
20
02
20
01
19
98
19
97
19
99
-3.3
-4.0
20
00
Percent
1.0
1.8
Years
June 2006
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0.00
June 2006
Eritrea
Tunisia
Mozambique
Uganda
Central African Rep.
Seychelles
Benin
Rwanda
South Africa
Guinea-Bissau
Lesotho
Cape Verde
Niger
Guinea
Burkina Faso
Ethiopia
Zambia
Tanzania
Senegal
Mauritius
Malawi
Zimbabwe
Botswana
Gambia, The
Togo
São Tomé &
Comoros
Madagascar
Mali
Morocco
Namibia
Djibouti
Sierra Leone
Kenya
Ghana
Burundi
Mauritania
Swaziland
Financing gap in % of GDP
Impact of Oil Price Increase on 2005 Financing Gap
3.00
2.25
1.50
0.75
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External balances are generally good and
improving……
5.2
5.0
3.5
4.6
3.1
1.6
2.3
1.2
0.0
-1.2
20
05
(e
)
20
06
(p
)
20
07
(p
)
20
04
20
03
20
02
20
01
20
00
19
99
-2.3
19
98
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
19
97
Percent
Africa: Trade Balance
(As % of GDP) - 1997-2007
Years
June 2006
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But oil importers adversely affected …
Region
Oil-exporting countries
Non oil-exporting countries
Total
June 2006
19972003
2004
2005e
2006p
2007p
3.2
11.0
15.7
15.8
14.4
-1.6
-3.7
-5.6
-5.7
-5.8
0.7
3.1
6.8
7.2
6.3
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Percentage deterioration of ToT
June 2006
0.0
Eritrea
Seychelles
Tunisia
Lesotho
Mozambique
Guinea-Bissau
Cape Verde
São Tomé &
Uganda
Rwanda
Togo
Mauritius
South Africa
Benin
Djibouti
Gambia, The
Swaziland
Malawi
Ethiopia
Mauritania
Central African Rep.
Zambia
Senegal
Niger
Guinea
Namibia
Madagascar
Ghana
Morocco
Tanzania
Sierra Leone
Burkina Faso
Mali
Botswana
Burundi
Comoros
Kenya
Zimbabwe
Impact of Oil Price Increase on 2005 Terms of Trade
10.0
7.5
5.0
2.5
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Policy implications for net-oil importing countries
Fiscal policy and poverty
•
No evidence that subsidizing petroleum is welfare improving
•
Subsidizing – or reducing VAT – on kerosene can soften the blow on the poor.
Caution: Long run sustainability of subsidies?
Monetary policy
•
Advisable to adopt a non-inflationary monetary policy to avoid hyperinflation
and maintain monetary credibility.
Capital account management
•
Obtain funds from private markets, bilateral and multilateral
which are consistent with debt sustainability.
sources
High oil prices should be viewed as a signal to use renewable energy: December 2005
AfDB approved a $5.5 million grant for 250 solar-powered boreholes in Madagascar.
June 2006
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Policy Implications Cont’d
Technical assistance and donor financial support
Establishing a Global Oil Fund?
Coordinated action by donors (bilateral, multilateral and emerging) is required.
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Policy implications for oil producing countries
Sound and transparent management of the extra oil revenue.
Make provision for future generations, e.g. savings fund.
Invest in human and physical capital to increase their production possibilities.
Avoid the misallocation of resources to preclude the so-called Dutch disease.
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Conclusion
Impacts of high oil price differ between net oil importers and oil exporters
Appropriate measures are needed to assist net oil importers in the short run, but long term
policy measures are required to cope with oil price increases
For oil exporters, management and better utilisation of the oil windfall -- key to sustainable
growth
Role of the donors and development partners crucial
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Thank you for your attention
June 2006
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Agenda
June 2006
1
Energy access and security and Africa
2
Challenges and opportunities in water resource management
3
Summing up and close
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Agenda
June 2006
1
Energy access and security and Africa
2
Challenges and opportunities in water resource management
3
Summing up and close
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Thank you
June 2006
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