Africa escaped the initial effects of the financial crisis but is now feeling the dire aftershocks from the global downturn. The impact on Africa already appears to be coming through three major channels: global trade, capital flows, and policy responses. Efforts to mitigate Africa's pain should tackle the risks in each head-on, says the Center for Global Development.
Although the global financial crisis did not initially hit Africa directly, the effects of the global downturn are starting to bite. Real GDP growth is now projected by the IMF to drop to below 2 percent this year, down from an average of over 6 percent for the last few years. I suspect the actual drop this year may be even greater, probably resulting in close to zero growth. While the attention of the major economic powers is rightly on rolling out a fiscal stimulus and getting credit markets operating again, there is growing concern that the world's poorest nations will be hardest hit by the global economic downturn. And no region is as poor and vulnerable as sub-Saharan Africa.
As the region least integrated into the global economy, Africa was spared some of the primary effects of the initial financial crisis; it is instead being hit by the aftershocks and the resulting global recession. Identifying the specific channels through which Africa is being hurt is the first step toward formulating appropriate policy interventions to ease the pain--and to help position Africa to benefit from an eventual recovery.