DEVELOPMENT AND TRADE Africa
Africa did not cause the economic crisis, but will suffer from it. What are the prospects?
W
ith developing countries now accounting for about 30% of world trade, development policies are about more than lifting people out of poverty and achieving the UN Millennium Development Goals. They have a serious and systemic impact on the welfare of the entire global economy. Developed countries should be particularly concerned about Africa. Aid and technical support, but above all more trade and investment, would help reverse what is becoming an increasingly worrying economic outlook. Only a year ago Africa’s economic growth prospects seemed historically bright. However, then the OECD warned of an uneven picture, with oil exports, for instance, accounting for a disproportionate amount of growth. Poverty was still widespread, and was not helped by high food prices. Institutional reform and human capital were also areas in need of attention. But with the economy then looking relatively good, there was widespread optimism about progress. But with the global crisis, GDP in the OECD countries is now expected to contract sharply in 2009 and be virtually flat in 2010, while growth in emerging economies will slow dramatically. World
©Zohra Bensemra/Reuters
Into Africa
trade is expected to contract by 13.2% in 2009–its first decline in 60 years. For Africa, this means that growth projections for 2009 have fallen to 2.8% after four consecutive years above 5%, though further downward revisions cannot be excluded. The hardest hit African economies are those that rely heavily on commodity exports for their income. Oil prices are starting to rise now, but some of that rise may be speculation. Most commodity prices are right back towards their 2005 or 2006 levels, many of them registering declines of 40% or more since early 2008. At the same time, the world downturn and dip in oil prices from last year have led to a slowdown in investment in oil and mineral production, which will affect growth in 2009 and 2010. African countries that rely on importing oil and other commodities face challenges too, with GDP growth in many of them expected to fall sharply in 2009 and 2010. For many countries in the region, high prices for imported food persist, seriously affecting the poor, particularly in the cities. Meanwhile, inflation has been volatile, as increases in international commodity prices from recent years pass fully through to consumers. If there is good news, it is that several years of solid expansion and reform were not for nothing. Africa is now better equipped to withstand an economic crisis than it was ten years ago. Wiser macroeconomic policies have strengthened fiscal positions, while debt OECD Observer
No 273 June 2009
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