Provides a broad synopsis of recent economic developments in the Middle East and Central Asia region, highlighting common trends and policies among countries in the region, and reviewing prospects and policies for the coming year. Includes a statistical appendix.

This paper presents the economic outlook for Sub-Saharan Africa for 2005. Against a background of an easing of demand for imports in advanced countries, average real GDP growth is expected to decline slightly in 2005 from its strong performance in 2004. The slowdown in 2005, however, is attributable primarily to lower growth in most of the oil-producing countries following the exceptional increases in oil production capacity established during 2003 and 2004, especially in Nigeria. Non-oil-producing countries are expecting average growth of about 4.5 percent, similar to that observed in 2004.

The paper investigates empirically the determinants of economic growth for a large sample of sub-Saharan African countries during 1981-92. The results indicate that (i) an increase in private investment has a relatively large positive impact on per capita growth; (ii) growth is stimulated by public policies that lower the budget deficit in relation to GDP (without reducing government investment), reduce the rate of inflation, maintain external competitiveness, promote structural reforms, encourage human capital development, and slow population growth; and (iii) convergence of per capita income occurs after controlling for human capital development and public policies.

This book demonstrates how the growing economic power of China and India is already influencing the growth patterns of African countries, particularly oil- and commodities-exporting ones.

The economy entered the crisis from a position of considerable strength because of past prudent macroeconomic management. Macroeconomic policies are being appropriately redirected away from short-term demand management toward medium-term considerations. Fiscal policy was strongly countercyclical during the past two years as the government ramped up spending despite a drop in revenues. The framework for managing the government’s assets and liabilities needs strengthening to cope with a more challenging fiscal environment. The authorities agreed that their development model would need to change.

Macroeconomic costs of conflict are generally very large, with GDP per capita about 28 percent lower ten years after conflict onset. This is overwhelmingly driven by private consumption, which falls by 25 percent ten years after conflict onset. Conflict is also associated with dramatic declines in official trade, with exports (imports) estimated to be 58 (34) percent lower ten years after conflict onset. The onset of conflict often also induces significant refugee outflows to neighboring non-advanced countries in the short run, and relatively small but very persistent refugee outflows to advanced countries over the long run. Finally, we stress that conflict should be defined in terms of the number of people killed relative to the total population. The traditional definition of conflict—based on the absolute number of deaths—skews the sample toward low-intensity conflicts in large countries, thereby understating the negative effects of conflict from a macroeconomic perspective.