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Prepared by Iacovos Ioannou.
The above assumes a population growth of 2.5 percent per annum. According to the IMF’s sub-Saharan Africa Regional Economic Outlook (2005), a real GDP growth of about 7.5 percent would be required for sub-Saharan Africa to meet the Millennium Development Goal of halving income poverty by 2015.
The literature on growth acceleration differs from that on the determinants of long-term growth. A country may experience very high growth rates without experiencing growth acceleration, and it may experience growth acceleration without necessarily experiencing a very high growth rate.
The predictive power of these models is limited. Explanatory variables account for only a small part of the probability of growth acceleration. Growth can accelerate when growth correlates are not present; conversely, growth accelerations do not always occur when the correlates are present. This conclusion is drawn both by Hausmann, Pritchett, and Rodrik (2004) and Pattillo, Gupta, and Carey (2005).
Hausmann, Pritchett, and Rodrik (2004) found fundamental economic reforms to be correlated with “sustained” growth accelerations. Sustained accelerations are those where the jump in the growth rate of per capita GDP is sustained beyond the time period defined as a growth acceleration (i.e., five to eight years).
This classification remains in effect until July 1, 2007.
Hausmann, Pritchett, and Rodrik (2004) use an eight-year window. Reducing the size of the window to five years makes it possible to identify acceleration episodes as recent as 2001.
A high post jump rate would make it possible to capture countries growing strongly after the acceleration episode, rather than countries experiencing acceleration from a low growth rate.
In contrast, Hausmann, Pritchett, and Rodrik (2004) use data that enable them to identify growth acceleration episodes during 1957–92; Pattillo Gupta, and Carey (2005) identify growth acceleration episodes in 1983–1999.
Hausmann, Pritchett, and Rodrik (2004) also report output gains of almost 40 percent relative to the pre-acceleration period.
This probability is estimated by dividing the number of episodes by the number of years in which growth accelerates.
In effect, the pick up in Cameroon’s growth rate was the result of either less rapid decline in output or modestly higher output, which when compared to the previous negative growth rates, resulted in a jump in the growth rate.
The analysis below only indicates possible obstacles to growth acceleration in Cameroon. It does not establish any causal relationship between the variables considered in this chapter and growth acceleration. The source of the data is the World Bank’s Development Indicators. Since data for the associated variables were not available for 2006, all country data are based on 2000–05.
Although there is evidence that middle-income countries experiencing growth acceleration have modestly higher fiscal deficits, concluding that Cameroon should also run higher deficits should be based on a careful assessment of fiscal sustainability rather than on a mechanistic adoption of a fiscal deficit target based on the experience of other countries. In essence, the appropriate fiscal balance conducive to growth acceleration would be one that is consistent with fiscal sustainability.
Except for mobile phone lines, the gap between Cameroon and middle-income countries experiencing growth acceleration is large.
The widespread misconception that companies in Cameroon are overtaxed is not supported by the data. While the tax system is indeed complex and in need of simplification to reduce the cost of compliance, the amount of taxes as a percent of gross profits is similar to that of other middle-income countries experiencing growth acceleration.