Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Africa and the Global Economic and Financial Crisis Shanta Devarajan World Bank http://africacan.worldbank.org Despite a resilient financial system, Africa may be the worst hit • “Resilient” because – African banks keep their loans on their balance sheets – Interbank and derivative markets are small – Foreign ownership is low (5%) in two largest countries (Nigeria and South Africa) – But: • 40% of South Africa’s loans are in mortgages; house prices are falling • Nigeria’s domestic credit grew rapidly in 2007-8 1. Africa has been increasingly relying on private capital flows Source: IMF World Economic Outlook, 2008 Signs that capital flows are slowing down or reversing • Stock prices are falling (private capital was a large share of market assets) – Nigeria’s stock exchange index has fallen 60%, Kenya’s 40% • Ghana and Kenya have postponed their sovereign bond offerings (worth $800m); D.R. Congo expects $1.8 billion shortfall in FDI 2. Remittances are slowing • Currently estimated at $20 billion • Expected to decline by 4.4% in 2009 • 75% of Africa’s remittances come from U.S. and Western Europe • Lesotho gets 29% of GDP in remittances 3. Foreign aid may be affected Source: David Roodman, Center for Global Development 4. Commodity prices are falling 4. Commodity prices are falling Terms of trade shocks (change in trade balance as percentage of 2006 GDP) Bottom 5, 2009 Bottom 5, 2008 Seychelles -13.90 Equatorial Guinea -26.05 Eritrea -11.68 Angola -19.00 Togo -7.79 Congo, Rep. -17.15 Cape Verde -7.25 Gabon -15.69 Senegal -7.07 Nigeria -13.01 Top 5, 2008 Top 5, 2009 Nigeria 22.92 Ethiopia 1.39 Gabon 28.23 Mauritius 2.44 Congo, Rep. 30.53 Togo 3.44 Angola 34.77 Eritrea 3.39 Equatorial Guinea 49.12 Seychelles 5.92 5. Macroeconomic imbalances • Ethiopia – 60% inflation – Trade deficit of 30% of GDP • Ghana – Current account deficit of 19% of GDP, fiscal deficit of 14.5% of GDP • South Africa – Current account deficit of 8% of GDP Implications • Africa’s GDP growth rate will slow from 4.9% in 2008 to 2.4% in 2009 GDP growth in Sub-Saharan Africa 8 6.9 7 GDP growth % 6 6.2 6.6 6.9 6.1 5.5 5.1 November 2008 estimates 4.9 5 4.2 4.1 4 March 2009 estimates 3 2 2.4 1 0 2003 2004 2005 2006 2007 2008 2009 2010 Implications • Africa’s decade-long growth has raised expectations among its people – Political fallout? • Part of Africa’s growth due to reforms undertaken since the 1990s Lower inflation across the board 140 45 7 6 6 7 6 5 4 2 3 2 2 40 35 13 13 100 30 80 25 60 20 33 31 33 30 32 29 31 40 24 27 28 31 33 17 20 0 15 Number of Countries Average Inflation Rate % 120 Inflation>20% 10%<inflation<=20% Inflation<=10% Average inflation rate 10 5 0 95 96 97 98 99 00 01 02 03 04 05 06 07 19 19 19 19 19 20 20 20 20 20 20 20 20 Source: World Bank WDI database. Indices were calculated based on the GDP weighted growth rates. Implications • If there is a growth collapse—a human crisis Differences between sample averages, selected variables, SSA 1975-2005 Growth Growth acceleration deceleration During Otherwise During Otherwise Life expectancy (years) 51.3 50.1 48.1 51.0 Dependency ratio .91 .93 .93 .92 Under 5 mortality (per 1,000) 145.8 161.9 187.1 148.8 Infant mortality (per 1,000 live births) 84.3 93.9 113.2 85.5 Primary completion rate (% of relevant age group) 52.5 49.9 41.4 52.9 ODA (% GDP) 13.6 13.6 11.9 14.11 ODA per capita (US$) 68.3 53.2 41.5 61.2 Consumer price index (%) 15.1 75.2 177 23.2 Source: Arbache and Page (2007). Policy response Initial Conditions Weak Impact Moderate to Strong Immediate e.g. Comoros, DR Congo, Guinea, Kenya, Seychelles, Sudan e.g. Mauritius, Sao Tome and Principe, Zambia Short term e.g. Burundi, Cote d’Ivoire, Ghana, Ethiopia, GuineaBissau, Liberia, Sierra Leone e.g. Benin, Botswana, Burkina Faso, Cape Verde, Lesotho, Nigeria, Swaziland Tailor assistance to initial conditions and impact Initial Conditions Weak Impact Moderate to Strong Immediate Fast-disbursing financial assistance (e.g. $100 million emergency credit to DR Congo) Scale up existing operations; possible fiscal stimulus; dialogue with civil society and other stakeholders (e.g. $30 million loan to Mauritius increased to $100 million) Short term Knowledge and financial assistance to smooth the reduction in macroeconomic imbalances (e.g. possible program in Ghana, coordinated with the IMF) Contingency planning and “front-loading” assistance (e.g. credits to Gambia, Benin, Mali increased) The Hope and the Challenge of Africa GDP growth in Sub-Saharan Africa 8 6.9 7 GDP growth % 6 6.2 6.6 6.9 6.1 5.5 5.1 November 2008 estimates 4.9 5 4.2 4.1 4 March 2009 estimates 3 2 2.4 1 0 2003 2004 2005 2006 2007 2008 2009 2010