Transcript Impact Of The Crisis On The Financial Systems in AFR

The Impact of the Global Financial Crisis
on Sub-Saharan Africa
Regional Economic Outlook
April 24, 2009
Norbert Funke, Victor Lledo, Gustavo Ramirez, and Irene
Yackovlev,
Disclaimer: The views expressed herein are those of the author(s) and should not be attributed to
the IMF, its Executive Board, or its management.
Agenda
How are recent developments in the world
economy affecting sub-Saharan Africa?
Outlook and Risks
for sub-Saharan Africa
Confronting Challenges:
domestic policies and donor support
Lower demand for African exports
5
15
(Weighted average, percent)
4
12
3
9
2
6
1
3
0
0
-1
World trade
grow th
(Right scale)
SSA Trade partners
Latest WEO projections
(Left scale)
-3
-2
-6
-3
-9
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Key commodity prices have fallen
to or even below Commodity
2007Prices
levels…
Commodity Prices
470
(Index, 2003=100)
WEO forecast
Oil
420
370
Sub-Saharan
African metals
320
270
220
170
Sub-Saharan
African, other1
120
70
2003
2004
2005
2006
2007
2008
09
Sources: IMF, Commodity Prices; and UN Comtrade.
1 Composite of cocoa, coffee, sugar, tea, and wood, weighted by sub-Saharan African exports.
Financing flows have declined
70
(Billions of U.S. dollars)
60
50
40
Aid
Remittances
Portfolio
Foreign direct investment
30
20
10
0
-10
-20
2000
2002
Source: IMF, World Economic Outlook.
2004
2006
2008
A decline in world growth drags
down growth in sub-Saharan Africa
Sub-Saharan Africa and the World: Real GDP
Growth1
(Percent)
8
Sub-Saharan
Africa
6
4
World
2
0
-2
1971
1976
1981
1986
1991
1996
2001
2006
Source: IMF, World Economic Outlook.
1
Periods of U.S. recessions shaded (National Bureau of Economic Research).
The outlook has deteriorated
markedly
Sub-Saharan Africa: Current and Previous Forecast for 2009
Current and Previous Forecast for 2009
Real GDP growth
(Percent)
10
April 2008
REO forecast
5
Current
account
balance
(Percent
of GDP)
0
-5
Latest AFR
projections
0
-5
Fiscal balance
(Percent of GDP)
Source: IMF, African Department database
5
Inflation
(Percent)
Growth is projected to decline in
2009 and recover mildly in 2010
GDP Growth, 2000-10
18
(Percent)
16
14
Sub-Saharan Africa
Oil-exporting countries
Middle-income countries
Low-income countries
Fragile countries
12
10
8
6
4
2
0
-2
-4
2000
2002
2004
Source: IMF, African Department database.
2006
2008
2010
Inflation will decline in most
countries
Inflation
. . . and inflation to fall in most countries.
Inflation
35
(Percent)
30
Sub-Saharan Africa
Oil-exporting countries
Middle-income countries
Low-income countries
Fragile countries
25
20
15
10
5
0
2000
2002
2004
2006
2008
Sources: IMF, World Economic Outlook; and IMF, African Department database.
2010
Risks to the outlook are
Sub-Saharan Africa:
mostly onFigure
the1.14.
downside
Growth Prospects
1
Growth Prospects
8
Real GDP growth
8
(Percent)
7
7
6
6
5
5
4
4
3
3
Confidence
intervals
2
2
50 percent
1
1
70 percent
90 percent
0
0
-1
2000
2001
2002
2003
2004
2005
2006
2007
Sources: IMF, World Economic Outlook; and IMF, African Department database.
1 Including Zimbabwe.
2008
-1
2009
Confronting challenges
Use available fiscal space
Where possible, ease monetary policy and
let the exchange rate adjust to the external
environment
Closely monitor financial vulnerabilities
and be prepared to act promptly
Keep medium-term goals in sight
Use available fiscal space
Risk of Debt Distress
Output gap
(Number of countries, 44 total)
20
Financing constraints
15
7 out of 9 have not reached
the HIPC Completion Point
10
Debt sustainability
5
0
Other constraints
Low
Moderate
Source: IMF staff estimates
High
In distress
Fiscal deficits are expected
to widen
Central Government Overall Fiscal Balances
Central government overall fiscal balances, 2000-10
15
(Percent of GDP)
Sub-Saharan Africa
Oil-exporting countries
Middle-income countries
Low-income countries
Fragile countries
10
5
0
-5
-10
2000
2002
2004
Source: IMF, African Department database.
2006
2008
2010
Where possible, ease monetary
policy
Some countries began to ease in 2008
Change in Monetary Policy
(Percent of SSA countries)
80
60
Second semester 2008
First semester 2008
70
50
60
40
50
40
30
30
20
20
10
10
0
0
Tightening
No change in policy
Source: IMF staff estimates
Loosening
Tightening
No change in policy
Loosening
Let the exchange rate adjust
to the external environment
Real Effective
Exchange Rates in Oil Exporters
and by Exchange Rate Regime
130
(Index, 2007=100)
125
Change in International Reserves
Since September 2008
25
(Percent of Sub-Saharan African countries)
Oil exporters
120
20
115
Monetary
unions
110
15
105
10
100
Floating
95
5
Conventional
pegs
90
85
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09
Source: IMF, Information Notice System.
0
< -15
-15 to -10 -10 to -5
-5 to 0
0 to 5
Change in reserves, in percent of September 2008 level
Source: IMF, International Financial Statistics.
>5
The external position is
expected to weaken
External Current Account Balances
External positions are also expected to weaken.
External Current Account Balances
16
(Percent of GDP)
Sub-Saharan Africa
Oil-exporting countries
Middle-income countries
Low-income countries
Fragile countries
12
8
4
0
-4
-8
-12
2000
2002
2004
Source: IMF, African Department database.
2006
2008
2010
Keep medium-term goals
in sight
Countries need to avoid imposing new
restrictions on trade flows as they work to
mitigate the impact of the global crisis.
It is important now to move ahead with
planned structural reforms in:
Public financial management
Social safety nets
Cost of doing business
How can the international
community help?
All these measures require the support of the
international community.
A lack of resources could set Africa back by several
years in terms of reducing poverty and providing
infrastructure.
This is the time where international commitments to
double annual aid promised by the G-8 Heads of State at
the Gleneagles summit in 2005 need to be honored and
even increased.
The Role of the IMF
To help African countries meet the
challenges of the current crisis, the IMF is:
Revising its lending instruments to make them
more flexible
Working to double concessional lending to
low income countries
Continuing to provide policy advice and
extensive technical assistance for
strengthening economic policymaking in
Africa
Thank you