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Policy Brief on the Financial Crisis - Impact of the Financial Crisis on African Economies - An Interim Assessment
Last year at this time, Africa was looking at a bright growth outlook, with many arguing that the continent had turned the corner from decades of economic stagnation and structural macroeconomic imbalances. Indeed in 2007, the continent recorded a growth rate of over 5 percent for the sixth consecutive year, which was an unprecedented achievement. Today, the picture is, unfortunately, drastically different. The continent is faced with severe uncertainties about its growth prospects and its chances of reaching its development goals. The main drivers of recent growth performance are threatened by the current financial and economic crisis. The demand and price of African primary commodities are declining, the recent upward trend of capital inflows appears to be losing steam, and promised increases in aid have noW materialized. Furthermore, inflationary pressures have increased in many countries, and the service sector is facing pressures with declining demand, especially for tourism. Already, growth forecasts have been revised downward as a result of these risks. While immediate effects of the crisis may have been limited, medium term effects are likely to be larger.
This paper is an interim assessment of the impact of the financial crisis on African economies as of to date. It also discusses risks and channels of further effects of the crisis in the medium term. It concludes with a discussion of policy responses to address the impact of the crisis.