A.1 Natural Resource Revenues Share of GDP, 2004-14

ANNEX A

Seizing the Opportunity of a Renewed Africa’s Resource Boom

International prices for many commodities have rallied and attained their highest levels as of 2022, after the 2020 global recession. The surge in prices was triggered by a rapid recovery in global demand associated with accommodative fiscal and monetary policies, supply disruptions, and greater demand for transition metals that are associated with decarbonization. After collapsing to its lowest point in half a century (US$20 in April 2020), the price of Brent crude oil jumped to US$129, its highest value in 10 years, increasing by 545 percent. Prices of base metals surged by 106 percent, reaching record highs in 2022, while agricultural commodity prices rose by 52 percent. The Russian Federation’s invasion of Ukraine in February 2022, along with the subsequent sanctions imposed on Russia, prompted a sharp jump in commodity prices, especially for oil, natural gas, and wheat. The prices of most commodities reached their highest levels since the global financial crisis. Movements in commodity prices play an important role in emerging markets and developing economies (EMDEs), representing up to 50 percent of the fluctuations in business cycles (Di Pace et al. 2021; Mendoza 1995; Kose 2002). Commodity exporters will benefit from elevated prices, while the effects will be harmful for commodity importing countries.

The Sub-Saharan Africa region depends heavily on commodity prices for government and external revenues. This reliance increases even further during commodity boom periods. On average, during the boom period of 2004-14, natural resource revenues as a percentage of gross domestic product (GDP) in Sub-Saharan African resource-rich countries were 9 percentage points higher than those in non-resource-rich countries in the region and 6 percentage points higher than those in non-resource-rich countries outside the region (figure A.1). Revenues as a percentage of GDP in the resource sector were considerably high for Angola, the Republic of Congo, and Equatorial Guinea. With the commodity boom episode of 2004-14, the number of resourcerich countries in SubSaharan Africa increased from 16 before 2004 to 26 at the end of 2014, according to the IMF (2012) definition. Surprisingly, resource-rich countries did not benefit from the 2 surge in commodity prices compared with their nonresource-rich neighbors (Cust and Zeufack 2022). Although resource-rich countries generated unprecedented economic

FIGURE A.1: Natural Resource Revenues Share of GDP, 2004-14

16 14 12 Percent of GDP 6 8 10 4 0

Rest of the world Sub-Saharan Africa Non-resource-rich countries Resource-rich countries Source: Cust and Zeufack 2022. Note: The bars show averages in resource-rich and non-resource-rich Sub-Saharan Africa compared to world averages. GDP = gross domestic product; RR = resource-rich. Increasing reliance on commodity revenues among resource-rich countries during the boom period.