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Working Paper 96 - Impact of the Global Economic and Financial Crisis on Africa
Prior to July 2008 and despite the subprime crisis, Africa recorded excellent economic growth. The drivers of strong economic growth included macroeconomic reforms, a world economic situation that was characterized by high demand for commodities, rising capital inflows and China’s strong growth. Analysts were optimistic about the capacity of the continent and the world economy to generate the necessary resources for development and poverty reduction.
Despite early signs of a pending downturn since 2007, few could have anticipated a crisis of the magnitude observed since the second half of 2008. Today, the world economy is officially in stagnation, industrialized countries are in recession and Africa faces serious uncertainties over its growth and development prospects. The current financial and economic crisis has affected Africa’s growth drivers. Demand for and prices of commodities are falling, capital inflows are declining and promises of increased aid have not materialized yet. China’s growth has slowed. The only good news is the easing in inflationary pressures. Although the immediate impact of the crisis were contained, the medium-term effects are likely to be greater.