13 March 2009
The International Monetary Fund (IMF) has warned that Africa’s economic growth will be affected by the continuing world economic crisis, predicting that growth in sub-Saharan Africa will slow to 3.25% this year, half the growth rate it previously projected.
The slump in commodity prices and the credit squeeze are the main culprits, the IMF said in a report released this week ahead of a major IMF conference on the crisis due to take place in Dar es Salaam, Tanzania on Tuesday.
The conference was called to discuss what external support the IMF and other Western donors might be able to provide to help mitigate the impact of the crisis on Africa, which has the highest poverty rate of any region in the world.
In recent years, many African countries have enjoyed strong growth rates, boosted by rising commodity prices, including oil.
“The gains of the past decade, during which many countries in sub-Saharan Africa saw sustained high rates of economic growth and rising income levels, are at risk,” said IMF African department director Antoinette Sayeh.
Less than a year ago, the IMF’s forecast for sub-Saharan Africa was economic growth of 6.7% in 2009, up from the 5.0% growth enjoyed in 2008.
The new low-growth forecast means that many African countries are likely to see very little increase in living standards, and could fall further behind in meeting their poverty reduction targets.
15 African countries ‘vulnerable’
The IMF report says that 15 of the 21 countries which it judges as most vulnerable to the crisis are in Africa, and that many countries will not have the funds necessary to protect the poor from the affects of the downturn and may need external help.
“While African policy makers are rising to this unexpected challenge, donors must also play their part. They must maintain their commitments and scale up, not scale back, their support.”
The IMF added that while Africa has little direct exposure to the credit crisis as its banks have not invested much, if at all, in the problematic financial assets at the heart of the crisis, the global downturn has undermined demand for many industrial commodities, which are important exports for several African countries.
These include oil in the case of Nigeria, Angola and Equatorial Guinea, and copper in the case of Zambia.
Reduced financial flows
Africa is also likely to be hit by reduced financial flows from abroad, including fewer remittances and less foreign direct investment.
However, providing more aid could prove controversial. The IMF itself is expected to ask for a substantial increase in its funding at the summit of the Group of 20 (G20) leading developed and emerging countries in London next month, but it is not certain whether such additional funds will be forthcoming.
As the IMF points out, foreign aid historically declines during an economic downturn.