Despite being fairly insulated from the global financial crisis, Sub-Saharan Africa felt the effects of the crunch through reduced foreign aid, slowing remittances and lower commodity prices. The continent suffered acute food and fuel spikes in 2008, which risked undoing economic gains made throughout the past decade.
In recent years, African economic activity was the best recorded in over three decades. It was supported by rising commodity production and exports, with higher foreign investments and official aid rather than credit growth. At the onset of the global financial crisis, Sub-Saharan Africa showed no signs of a change in its growth rate, which had averaged 5% annually for about a decade; however, it was hit through second round effects.
Strong macro-economic policies adopted by the region earlier in the decade helped ease the severity of the global slowdown. In 2009, the region experienced a sharp slowdown in growth to around 1%, well below recent trends of 6%, due to the higher costs and reduced access to capital, lower trade volumes and reduced remittances. Some major economies like South Africa and Botswana experienced negative growth while others faced significant slowdowns from recent trends.The region moved from having a balanced current account and even a surplus in some instances to having a deficit in 2009.
The region is expected to register stronger growth in 2010 driven by a resumption is commodity exports and capital inflows. It faces downside risks from the European fiscal retrenchment and the deceleration of growth in China. Growth across the region will not be uniform, with commodity exporters outpacing importers. Among importers, East African economies are poised to spearhead regional growth as they have strong balance sheets and are benefiting from expansionary fiscal policy and domestic demand.
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World Economic Outlook: Africa’s Growth Is Accelerating
McKinsey Global Institute
Lions on the move: The progress and potential of African economies