Transcript Slide 1
Recovery from the
Global Crisis:
Implications for
SADC and
Development
Finance
Keith Jefferis
May 2010
Remember early 2009 ….
World Economy
Financial crisis
Freezing of credit markets
Sudden plunge into deep
recession
Collapsing commodity prices
Concern about prolonged
depression
Rising unemployment
Bank rescues and fiscal
injections
SADC/SSA
No financial crisis, but concern
about knock-on effects of
global crisis, via
Trade
Capital/financial flows
Risk aversion
Macroeconomic concerns
Growth slowdown
BoP
Fiscal problems
Poverty
Global growth slowdown ... and
recovery
Depths of recession – 4Q2008
and 1Q2009
Recession was deep, but
recovery has been robust
Fears of prolonged depression
not realise
Global growth projected to
settle in 3% - 4% range in 201011
Emerging markets leading the
recovery
Recovery has been driven by
emerging markets
Faster emergence from
recession
Higher growth during recovery
Less affected by financial crisis
and debt problems – more
resilience
Developed economies –
sluggish recovery:
Fiscal/debt problems
Unemployment
Euro-zone crisis
South Africa lagging other EMs,
but recovering
South Africa’s recession
has been comparable in
depth to Emerging
Markets generally, but:
SA lagging general EM
recovery
SA growth expected to be
reasonably robust in 2010,
due partly to World Cup
effect
Growth projected to
weaken going into 2011
Signs of recovery ... minerals
prices
Copper
Nickel
… and oil prices
Economic Developments in SubSaharan Africa
SSA Economic Outturn
Greater resilience than
expected
Growth slowdown relatively
modest
Quick recovery expected
Macroeconomic stress
manageable
Greater impact on middle
income countries, more
integrated into global markets
Source: IMF REO SSA April 2010
Why such a modest economic
impact on SSA?
International
Quick and robust global
recovery in growth, trade &
commodity prices
SSA growth slowdown driven
by reduced demand, not
banking crises
Emerging market growth ->
commodity prices
Recovery in financial flows
Domestic
Prior reforms and restructuring
-> many countries started from
strong macroeconomic
position
Prior fiscal reforms enabled
fiscal stimulus
Appropriate monetary policy
response – inflation not a
major concern
Resilient financial systems
Contrast with previous crises
Finance & Capital Markets
Central to economic problems
in developed markets – and
transmission of those
problems around the world
Credit crunch
Risk aversion
Market collapses
Impact short-lived
Only small decline in
remittance inflows
Development assistance:
overall flows held up,
especially with boost from
MFIs
Recovery of risk appetite
Resurgence of portfolio flows
to EMs – low returns in major
markets
SSA role of FDI – less volatile
than short-term flows
But of course there are
problems…
Fiscal & Debt conditions
Partial but not full recovery in global demand
Rising unemployment
Household income squeeze
Poverty alleviation/MDGs
Well below trend
Employment & Incomes
Limited fiscal space
Needs to be carefully managed
Setbacks/delayed achievement
Fragile states
Especially vulnerable
Economic Outlook - SADC
Inflation: much reduced, not a major
concern, allows monetary policy easing
46%
Source: IMF REO for SSA (April 2010)
Real GDP growth – recession mostly avoided
in 2009, strong recovery projected for 2010
Source: IMF Regional Economic Outlook, April 2010
Fiscal balance: some large deficits, esp.
in SACU, but generally manageable
Current account: some large deficits,
and dependence on capital inflows
Source: IMF Regional Economic Outlook, April 2010
Reserves: some declines, but still
comfortable in most countries
Source: IMF Regional Economic Outlook, April 2010
Outlook & risks – world economy
More positive than a year
ago
Medium-term outlook
still uncertain
Worst fears of depression
End of inventory-driven
appear not to be realised
International recovery
under way
Recovery in financial and
commodity markets
BUT volatility and
uncertainty still apparent in
currencies, commodity
markets
“Double –dip” recession
cannot be ruled out
upturn
Duration of impact of fiscal
stimulus
Consumer confidence
Lagging impact of rising
unemployment
Financial sector uncertainty
– re-regulation
De-leveraging
Rising long-term interest
rates & crowding out of
private investment
Outlook & risks …. SADC
Positive
Africa growth should resume
pre-crisis trajectory – helped
by higher global growth
Resource rich – benefit from
resumption of commodities
boom
Focus can now change – from
short-term output stabilisation
to medium-term development
challenges
Negative
Slow growth in Europe – major
export market
Global growth – still vulnerable
Limited growth of donor
resources, especially bilateral
Commodity price volatility
Slow progress on regional
integration
Energy shortages
Implications for DFIs
Finance is at the centre of
Scope for more stable view of
attention
SADC financial systems
generally stable
Recognition that markets and
commercial FIs cannot achieve
everything
Many African countries still bypassed by commercial flows
Banks still cautious
Recognition that particular
development gaps exist –
infrastructure, SMMEs,
agriculture, unbanked – that
may have to be filled by DFIs
risk
Improving domestic bond
markets
AfDB – AFMI
Government resources
constrained
More resources from MFIs
Opportunities in new
technologies & partnerships
(MFIs, telcos, donors)
Regulation?
Thank You