Introduction

Despite cautious optimism about the region's progress, Africa's growth must be boosted if poverty is to be reduced for large numbers of people. The macroeconomic reforms that facilitated positive growth for three years now must be deepened to reshape the role of the state and enhance its effectiveness. In fiscal 1998 the Bank worked closely with African clients to support them in efforts to improve social services and infrastructure and build attractive business environments that will encourage private investment and private sector development. Special attention was given to human development, especially to helping African people take advantage of global communications systems for accessing information. Several countries qualified for assistance under the Highly Indebted Poor Countries (HIPC) Debt Initiative, allowing them to focus scarce resources on development and poverty reduction rather than debt repayment.

For the third year in a row, the average Sub-Saharan African country experienced positive per capita economic growth in 1997. This, combined with improved economic policies and increased political openness, has created greater opportunity for development. As Africa's leaders address the different development needs of their countries and strive for what some are calling an African renaissance, the World Bank has been challenged to find new ways to respond to these opportunities and to meet the changing needs of its African clients.

The Bank's fiscal 1997 Annual Report was optimistic about the region's economic recovery. This is reinforced by the fiscal 1998 results. While the region's gross domestic product (GDP) grew at 3.8 percent, this was heavily influenced by South Africa's growth of 2 percent in 1997; the average African country grew 4.6 percent, slightly lower than in 1996 (4.8 percent). Some thirty-seven countries registered positive per capita GDP growth in 1997, and twenty-one of them grew at 5 percent and more. Exports expanded roughly twice as fast as gdp in recent years and lower fiscal deficits and inflation also boosted growth (see figure 2-1).

But optimism must remain guarded while economic performance falls short of levels needed to reduce poverty substantially and deliver growth to all layers of society. Serious challenges to recent progress must be recognized:

• HIV/AIDS as an economic threat;

• dependence on development assistance;

• the rapid rise of domestic debt in some countries; and

• the potentially dampening effect of the East Asian crisis.

The majority of African economies have responded positively to growing social stability and sound policies, but the plight of Africans in some eight or so countries still severely affected by social and political instability must not be forgotten. Some, like Angola, show impressive growth figures, but they do not translate into either stability or better living standards.