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      Source: World Bank World Development Indicators.

      We now examine whether the increasing importance of trade and financial flows have increased the reliance of performance in African countries to that of the world or of China as might be expected because of large primary exports to China and increasing aid from China.

      There is an increase in correlation of growth in the region as a whole with growth of the world economy, or growth in the US or growth in China (Table 7). But such increased correlation holds for only very few countries.

      The deterioration in the current account bodes badly for the future as, in the past, current account problems had often resulted in implementation of contractionary fiscal and monetary policies that at least in the short run had a negative effect on growth. This effect had usually operated through a decline in gross fixed investment, as developing countries depended on imports of capital goods. Before the debt crisis of 1982, investment rates in SSA were a success story, being the highest among developing country regions (Table 8). However, investment rates had fallen in LAC and SSA through much of the 1980s and 1990s and contributed to low growth in those years, whereas investment ratios had been increasing in EAP and SA. But investment rates have held up well since the financial crisis, actually rising further in LAC and SSA, raising hopes that the crisis may have only a limited adverse effect on growth in developing countries.¹⁰ It is also important to note that the investment share in GDP has recovered in SSA to levels that had prevailed in the 1970s even though in LAC it is still lower than it was in the earlier period. The maintenance of investment rates raises the hope that the worsening current account balance may have a limited effect on growth rates. Furthermore, the worsening of the current account may be only temporary if the investment raises the output of tradables, leading to higher exports and lower imports.

      Another hopeful sign is that the capital output ratios (ICORs) have been falling in these regions, whereas in Asia these have remained at about 4 since the 1970s. They had risen to double-digit levels in the 1980s in the other regions. But currently, they seem to vary from about 4 in SSA to 5.5 in LAC.¹¹ The fall in the ICORs means that the same investment GDP ratio would lead to a higher rate of growth than it would have in earlier years. Current levels of the investment ratio and the ICOR would result in GDP growing at over 5% a year in SSA and almost 4% in LAC, which would be lower than the growth rates achieved in these regions during 2006–2008 but higher than those achieved during 2011–2016.¹²

Table 7. Correlation of growth rates with different regions

      Source: Authors’ calculations from data in World Bank World Development Indicators.

Table 8. GFCF by Region (% of GDP)

      Note: High Y is high income.

      Source: World Bank Data Bank, World Development Indicators, World Bank: Washington D.C.

      The limited effect of the current account deficit on investment is because domestic savings have increased, so investment is less dependent on inflow of foreign funds whether official or private (Table 9). However, savings rates in SSA and LAC remain lower than in those achieved in the 1980s. So SSA remains vulnerable to negative trends in the current account balance.

      In brief, GDP has increased the slowest in SSA. There had been higher growth rates in the years before the crisis, but SSA has been particularly hard hit by the crisis. Countries in SSA also have done less well than countries in other regions in increasing export share, and despite increased remittances they are experiencing a worse current account position than countries in the other regions. We now examine the performance of the countries in SSA based on their export orientation.

       Economic Performance by Export Orientation

      A possible explanation for the poor performance of the countries in SSA could be because they are exporters of primary goods. In this section, we examine the differences in economic performance between countries according to the nature of their exports. We divided the countries by their export orientation, namely the commodity group which had the largest share. The countries were divided into those exporting final agricultural commodities, agricultural raw material, ores, fuels and manufactures. There were 18 countries exporting final agricultural commodities and 8 exporting manufactures.

Table 9. Domestic Savings

      Source: World Bank Data Bank, World Development Indicators, World Bank: Washington DC.

      We find that growth rates for most of the groups have increased since the 1990s except for manufacture exporting countries (Table 10). Furthermore, exporters of agricultural commodities and ores have not only maintained their good performance after the financial crisis but also further raised their growth rates. The other groups have seen some decrease in their growth rates during 2011–2016 as compared to the 2000s, but except for manufactures, they have maintained a growth rate higher than in the 1990s. Also, whereas in the 1990s exporters of manufactures generally did the best among the different groups, they did the worst in the 2000s. Slower growth since the 2008 crisis seems to have had a particularly unfavourable effect on demand for manufactures. Most of the groups raised the share of investment as a percentage of GDP from the 1990s; again, the exception was the manufacturing exporting countries. It is particularly important to note that the share of GFCF which had increased between the 1990s and

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