Start This Engine

• Author: Donald Kaberuka
• Position: President of the African Development Bank
• Pages: 54-55

Page 54

Africa’s policymakers should prepare for global recovery by priming their private sectors

AFRICA’S limited integration into global markets has provided little protection from the direct effects of the global financial crisis. But Africa should brace itself for the consequences of the global crisis on its real economy. The speed at which African economies have been affected has exceeded earlier expectations. Although the extent and depth of contagion are uneven across the continent—with mineral-exporting countries, large open economies, and fragile states affected most through one or several transmission channels—the continent as a whole has seen its growth prospects reduced from an average of 6 percent to less than 3 percent.

Widening current account and budget deficits pose an immediate threat to macroeconomic stability that years of economic reform helped establish. The ability of African governments to undertake needed crisis response, let alone sustain basic services and development programs, will be seriously tested. At this stage, it is difficult to predict how long African growth will continue at half its previous pace, because the global crisis is still relatively young. It is safe to assume, however, that whenever the global economy returns to a growth path, Africa’s recovery is likely to be asymmetrical.

But African policymakers can prepare right now to take advantage of a global economic recovery. They can start hooking up more of their domestic economies to the most reliable and potent short-term engine of growth at their disposal: the private sector. The African Development Bank (AfDB) is one of several international financial institutions standing ready to help Africa harness the private sector. This important endeavor can and should start promptly, so that Africa’s economies participate fully with the rest of the world in the global upswing that follows the downturn.

Booms and busts

Africa’s growth trajectory over the past 30 years has been one of episodic growth phases followed by prolonged decline, typically on the back of commodity booms and busts and with internal factors aggravating the trend. The current global crisis, however, probably marks the first time in many years that, for a large number of African countries and not just for the big commodity exporters, the primary cause of an economic slump has been external and out of their control...