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The economic landscape of sub-Saharan Africa has changed dramatically since the mid-1990s, with stagnation giving way to dynamism in a broad swathe of countries.
Aggregate GDP growth climbed from less than 2.5 percent in the 1990s to around six percent in 2003–07. The region has also begun to make headway in poverty reduction and on achieving the Millennium Development Goals.
“The African economy has been more resilient to the global crisis than other emerging economies, with the exception of those in Asia, notably China and India, it says, noting: “The effect of the crisis, although less severe than on most other continents, was nonetheless significant,” the 2010 edition of the “African Economic Outlook”, which highlights the continent’s resilience to the global financial and economic crisis, has said. The report, which was launched recently and attracting greater attention among researchers and development partners, said although in the three years before the 2009 global recession Africa had achieved an average annual growth of around 6%, in 2009 the growth rate was slashed by 3.5 percentage points to 2.5%; actual growth in Africa was almost exactly what had been predicted in last year’s African Economic Outlook (2.3%).
The impact of the global financial crisis on countries in the region was quite varied. Output levels in most middle-income countries were dragged down by the sharp fall in export volumes in early 2009 as world demand collapsed. Growth in oil-exporting countries also decelerated sharply, partly reflecting the drop in oil prices. In contrast, many low-income countries escaped fairly lightly, with some fragile economies actually experiencing a small acceleration in output growth in 2009.
The relatively limited nature of the region’s slowdown owes much to the health of the region’s economies heading into 2008–09 and the countercyclical macroeconomic policies that were pursued in many countries. Nearly two-thirds of countries experiencing a slowdown in 2009 were able to increase government spending to buttress economic activity. Policy interest rates were also reduced in most countries. Of course, the slowdown has nonetheless entailed considerable social dislocation and suffering. As a result, slower progress can be expected toward the Millennium Development Goals. This is not the time to rest on our laurels, says the World Bank. Africa remains highly vulnerable to economic dislocation from many different sources. Think about swings in commodity prices, natural disasters, or instability in neighboring countries; also, the risks that come from relying heavily on remittances, aid, and financial flows. Think about climate change, the World Bank opines. Africa will continue to face large, persistent and costly shocks - and these shocks will continue to cause great human suffering. Without a secure standard of living, people might turn to unproductive or even violent activities, possibly leading to instability, a breakdown of democracy, or war—which will not help the continent in any way. It will rather compound the initial suffering that people go through on daily basis. Especially in resource-rich countries, the blessings of riches can turn rapidly into the curse of conflict.
The twin challenges for Africa are to revive strong growth and reinforce resilience to shocks. The first place to start is with macroeconomic policies. A major lesson from the crisis is that countries that sowed in times of plenty were able to reap in times of loss. Policy buffers must therefore be rebuilt, to allow for future countercyclical responses, with fiscal policy and with reserves. Social safety nets must be strengthened—this is the first line of defence for the population against adverse shocks. We should also beware that widening income inequality—across regions or segments of the population—can aggravate tensions and make shocks more destabilising.
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