Seeking the ‘shoots’ of economic recovery

Roy Laishley

Has the economic crisis reached bottom, with slow recovery under way? Or is the world facing continued recession and with it deepening poverty for many Africans? “No one can tell with any degree of certainty whether the worst for the global economy is over,” Donald Kaberuka, president of the African Development Bank (ADB), responded at the opening of the Bank’s annual meeting in Dakar, Senegal, in May.

There is consensus among forecasters that global output will decline this year, but they disagree about the depth of the recession and when and how strongly growth will be renewed.

In June, the World Bank predicted that the world economy would shrink by 2.9 percent this year, by more than either its April forecast of a 1.3 percent drop or projections by the International Monetary Fund (IMF). The ADB, in a paper for the May meeting, lowered its forecast for Africa’s growth to 2.3 percent from the 2.8 percent it had predicted just three months earlier, amidst fears that “the worst may be yet to come.”

That is exactly what worries the United Nations. In a May update to its World Economic Situation and Prospects, 2009, Africa’s economic growth is forecast for less than 1% this year.

The UN is less hopeful than some others that the “green shoots” of economic recovery are emerging, Rob Vos, a senior official in the Department of Economic and Social Affairs that produced the report, told journalists. There are few signs of springtime “in this very wintry landscape,” Mr. Vos said.

“For a large number of countries, there are no green shots of recovery,” UN Secretary-General Ban Ki-moon said at the opening of a 24-26 June conference of the General Assembly on the impact of the global crisis on development. “There are only fallow seeds.”

The weak integration of African countries into the world economy initially helped shield the continent from the direct impact of the turbulence in financial markets, UN Under-Secretary-General and Special Adviser on Africa Cheick Sidi Diarra pointed out at a special session on Africa and least developed countries (LDCs) during the General Assembly conference. But, Mr. Diarra added, “Most African countries have suffered significantly from the second-round effects arising from the decline in investment, tourism receipts, as well as falling export earnings.” For Africa and the LDCs, “the crisis constitutes a development emergency.”

A poor neighbourhood in Freetown, Sierra Leone: The UN warns that an additional 12-16 million people will be thrown into poverty in Africa because of the economic crisis.

Because of the crisis, an additional 12-16 million people will be thrown into poverty in Africa, the UN estimates. For the first time since 1994, per capita income will contract for the continent as a whole, the ADB adds. The major forecasters all agree that economic growth in Africa will again pick up next year.

The ADB is predicting a 4.1 percent upturn in 2010, and the UN report cites forecasts ranging from an optimistic 5.3 percent to a pessimistic 1.7 percent. The World Bank sees sub-Saharan Africa growing by 3.7 percent in 2010, but warns that the risks are “heavily tilted to the downside.”

Years of relatively strong growth and deep policy reforms are helping many African countries weather the present economic crisis better than previous downturns. But the resilience of African economies is limited.

Third World Network Features