Africa’s economic growth to half at 2.8% in 2009 – Report

Africa has been “gravely affected” by the global economic downturn and its growth rate will halve this year due to collapsing commodity prices and a decline in donor funding, a new report said Monday.

The 2009 African Economic Outlook finds that after half a decade of above 5 percent economic growth, the continent can expect only 2.8 percent growth in 2009.

The annual report covers 47 of the 53 African countries and is a key document that influences government policy and donor spending.

It was produced jointly by the Development Center of the Paris-based Organization for Economic Co-operation and Development, made up of countries from the developed world, and the African Development Bank with support by the economic agencies of the United Nation and the European Commission.

The report anticipates growth rebounding to 4.5 percent in 2010 and it notes that the continent is in a stronger position than it was a decade ago thanks to reforms.

“On a more positive note, Africa is better prepared for the crisis,” said OECD economist Federica Marzo. “Africa is more resilient.”

The OECD has forecast that world trade will contract by 13 percent in 2009, further driving down commodity prices from oil and mineral-rich Africa, which began falling last year.

Marzo said countries which have been most affected by the financial crisis are those whose economies that are more integrated with global markets.

South Africa, a regional powerhouse, has entered its first recession in nearly two decades after the economy shrunk 6.4 percent during the first quarter of this year.

Botswana, the largest producers of diamonds, saw GDP shrink by 20 percent in the first quarter of 2009. Growth in Angola, one of Africa’s oil exporting countries is expected to turn negative by about 7 percent this year.

However, Marzo said there are group of countries which are still performing well and will continue to see growth of about 6 percent. These includes Rwanda, Tanzania and Ghana which have diversified their economies and have strong agricultural sectors.

In addition, countries such as Liberia and Sierra Leone, which are recovering from long conflicts, can expect high growth, she said.

Improved macro-economic policies and fiscal management have seen levels of indebtedness decrease in Africa. There is also a greater variety of trade and investment partners. China increased its trade with Africa by 50 percent last year.

However, benefits accumulated over the years of reform now risk being eroded by the economic crisis and there is a danger countries will fall back into poverty, the report said.

Foreign direct investment decreased by about 10 percent in 2008 and while aid to Africa increased last year there are concerns that donor budgets are being slashed.

African governments are also under pressure to reduce spending. Angola has cut public investment by 40 percent and spending on poverty reduction schemes have declined in Kenya, Zambia and Nigeria.

Rising prices saw food riots in parts of Africa last year and the burden on workers has continued with serious job losses.

In Zambia, 20 percent of the miners have been fired while Congo has seen 100,000 workers laid off. In South Africa, where there has seen protracted strike action, 180,000 jobs have been shed.

“The deteriorating living conditions of people is worrisome also in terms of political stability,” Marzo said. “This year, in the context of decreasing resources it will be more difficult for government to respond to the instability and this is a real risk.”

She said trade with emerging markets such as China and India, where sustained growth is still expected, would help offset some of the effects of the global crisis.

The report predicts that markets will begin recovering in 2010 and this will lead to a renewed demand for African commodities.

“There is consensus that we are at the bottom of the crisis,” she said. “How long Africa will take to recover its high growth rate is very difficult to say.”

Source: AP

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