WAMA – ANNUAL REPORT 2010
After a stagnation in 2009, the world economy recorded a significant recovery in 2010. World growth stood at 5.0% in 2010 as against -6.0% in 2009.This recovery was observed both in advanced and developing countries. In advanced countries, real GDP growth rate rose from -3.4% in 2009 to 3.0% in 2010. Emerging and developing countries witnessed accelerated growth from 2.7% in 2009 to 7.3% in 2010. This buoyant growth in 2010 was mainly attributed to the vibrancy in industrial output and international trade which was boosted by a rebound in investments and household consumption. In Africa, most countries recorded accelerated growth thanks to the upturn in demand for commodities and a rise in the prices of major exports.
Sub Saharan Africa recorded a real GDP growth rate of 5.0% as against a mere 2.6% in 2009. Despite this positive trend, the world economic situation remained fragile in many emerging countries; demand was robust and overheating was a source of concern. Besides, the hike in commodity and food prices led to new inflationary pressures.
Taking advantage of this more favourable international context, ECOWAS economies achieved a real GDP growth rate of 6.8% compared to 5.6% in 2009. Nigeria (7.9%), Niger (7.5%) and Ghana (6.6%) recorded the highest growth rates in 2010. On the other hand, Guinea (1.9%), Benin (2.8%) and Côte d’Ivoire (3%) had the lowest growth rates. However, all ECOWAS countries with the exception of Cote d’Ivoire witnessed accelerated growth in 2010. This accelerated growth was generally driven by performance in the primary and tertiary sectors. Performance in the primary sector was due to heavy rainfalls and a growing demand for commodities. The buoyancy in the tertiary sector stemmed from the recovery in tourism as well as the development of telecommunications and financial services.
In 2010, economic activity within the ECOWAS region was conducted against the backdrop of a slight
increase in inflation. Average annual inflation rate stood at 9.9% as against 9.3% in 2009. As was the case in the past, the highest inflation rate was recorded in the WAMZ countries, especially Guinea (15.5%), Ghana 14.7% and Nigeria 12.4%. As a result, annual average inflation rate of WAMZ stood at 12.6% as against 1.3% for UEMOA. Cape Verde, whose currency has a fixed parity with the Euro, recorded an average annual inflation rate of 3.1% in 2010. The main elements that accounted for the upward trend in prices within ECOWAS in 2010 were food, accommodation and transportation. Transport prices went up in line with the readjustment of ex-pump fuel prices as crude oil prices started escalating again on the international market.
With regards to public finance, ECOWAS countries, on the whole, recorded an overall budget deficit of
3.9% in 2010 as against 3.2% in 2009. Guinea (14.0%) Burkina Faso (7.5%) and Sierra Leone (6.1%)
recorded the highest deficits. The worsening overall deficit of the ECOWAS region was attributed to a
significant growth in capital investments and wage bill within a context of a moderate increase in revenues and grants.
Concerning the external sector, the current account surplus which had already been affected by the
international financial crisis in 2009 recorded a drastic fall in 2010. As a percentage of GDP, the current
account surplus of ECOWAS dropped from 11.7% in 2008 to 7.0% in 2009 then to 0.1% in 2010. This
situation stemmed mainly from Nigeria’s surplus which dropped from 22.0% of GDP in 2008 to 13.1% in
2009 before dwindling to 3.8% in 2010. The deterioration of Nigeria’s current account balance was attributed to the expansion in the import bill as well as the decline in net services and current transfers despite the positive trend in the goods trade account.
In terms of the requirements of the ECOWAS monetary cooperation programme, the macroeconomic profile within ECOWAS deteriorated marginally in 2010 with the resurgence of rising inflation and substantial budgetary imbalances. This deterioration was observed in respect of criteria on inflation, wage bill, domestically funded investments and real interest rates. However, there was a slight improvement in the budget deficit and accumulation of domestic arrears. Performance in terms of tax revenue performance and budget deficit financing by the Central Bank was maintained.
On the whole, the best performance at the end of 2010 was achieved by Niger which met eight (8) criteria out of ten. This country was followed by Mali, Burkina Faso, Senegal and Togo which complied with seven (7) convergence criteria. Benin then followed with six (6) criteria observed. The worst performance was recorded by Ghana, Guinea and Sierra Leone which were able to meet only one secondary criterion each.
With regards to policy harmonization and institutional arrangements, there was a significant progress. All the NCCs have been set up and are operational in member countries, with the exception of Cape Verde and Ghana. In the case of Ghana, progress has been made to ensure the functioning of the NCC while in Cape Verde; the Authorities are against the multiplicity of structures and are proposing a regrouping of institutions under one ECOWAS unit.
As regards policy harmonisation, significant progress has been registered but there is need expand the level of development and interconnection of payments systems, capital account liberalization, and total adoption of the ECOWAS common external tariff, the harmonization of statistics as well as the removal of all barriers to the free movement of persons, capital and goods within the community.
The detailed analysis of the macroeconomic situation in the various countries shows that prospects for 2010 are good. In fact the regional growth rate would be maintained above 6%. Inflationary pressures would be contained. Similarly, major budget indicators would improve. As regards macroeconomic convergence, improvements are expected especially in countries coming out of crisis like Guinea and Cote d’Ivoire.