All About Goals as Africa Shows Signs of Recovery

• Author: Jon Shields
• Position: IMF African Department

After the battering that their economies received from world developments last year, countries in sub-Saharan Africa will be aiming at speedy economic recovery in 2010, and at resumed progress toward the Millennium Development Goals. Here, at least, prospects are brightening.

Recent performance is very much on the side of African economies. Between 2002 and 2007, GDP in sub-Saharan Africa rose at an average annual rate of over 6 percent, consistently higher than the world average (see Chart 1). At the same time, inflation was generally contained at moderate levels, government finances improved, and international reserves rose.

But that was before the region was put on the defensive by world developments; first, the worldwide price hikes for food and fuel in early 2008, and then the global financial crisis and recession. These events led to a marked slowdown in growth throughout sub-Saharan Africa, with commodity exporters suffering sharp cuts in demand for their products and South Africa falling into recession. In 2009, it seems likely that GDP growth in the region was only 1 percent.

Signs of recovery

The good news for 2010 is that signs of recovery in GDP are already appearing. Industrial production began to pick up in South Africa in the third quarter of 2009. Throughout the region, exports have been rising strongly since the second quarter of 2009, reversing much of the hemorrhaging that began in the third quarter of 2008 (see Chart 2).

In the private sector, consumers and businesses seem to have cut back less during the global recession than in some other regions. Indeed, while the risks remain sizable, and the maintenance of the global recovery will be critical, all the economic indicators for sub-Saharan Africa are now consistent with a bounce-back in activity. In its October 2009 World Economic Outlook, the IMF looked for GDP growth in sub-Saharan Africa of about 4 percent in 2010.

A critical factor in cementing this recovery will be the behavior of the public sector. In 2009, it was the decision by many sub-Saharan African countries to allow government deficits to rise in the face of revenue shortfalls, and to reduce policy interest rates, that helped their economies absorb some of the impact of the external shocks. The IMF strongly supported these policies, in part by committing over $4 billion of new lending to countries in the region in 2009. Where...