Abstract:  The global financial crisis of 2008 has left lasting effects on the structure of financial markets, international capital flows, and the cost of capital for developing countries. This paper explains how the crisis originated, and the underlying factors that turned a relatively small collapse in the US subprime mortgage market into a global crisis. It then explores similarities and differences between the current crisis and past experiences. That comparison highlights the main determinants and transmission mechanisms involved, which can help design a better response to the current situation on the one hand, and to prevent future crises or minimize their impact on the other. Finally, the paper discusses structural policies that make countries more resilient to external shocks and also reduce the incidence of home-grown crises.

Abstract:  The global financial crisis has affected G-20, African and other countries. Effects have been widespread and have encompassed a wide range of transmission belts, albeit different ones in different countries, and with different levels of impact. When the crisis broke, several analyses at the time (in September 2008) suggested that sub-Saharan Africa (SSA) would not be affected as much because financial systems were not leveraged as much as in the UK and the US. By the end of 2008, however, it had become clear that SSA was feeling the effects of the crisis, probably mostly through real channels. Recently, it has become clear that SSA has been affected also by financial contagion. International bank lending increased at unsustainably fast rates until September 2008, but has since decreased significantly, by around 10 per cent in the case of Africa. Based on actual evidence so far, and forecasts in some cases, we note a shortfall of some $134 billion for SSA countries (trade, bank lending, remittances, portfolio flows and foreign direct investment (FDI)). As a result of the crisis, 10 African countries are experiencing declines in real GDP (compared with forecasts made before the crisis) of more than 5 per cent in 2009, 11 of between 3 per cent and 5 per cent and 19 of between 1 per cent and 3 per cent; others have been affected less.

Abstract:  This paper is intended to highlight the general impact of the crisis on African countries in terms of economic performance and then show some variations across countries by discussing how the different transmission channels operated in them, and what their effects have been. The paper has noted that the global financial and economic crisis has affected African economies in a significant way, mostly indirectly through the harm it causes to the real sectors of the economies. In aggregate terms, the impact has been quite strong, as shown by the sharp drop in aggregate output around the region. Even though there are both direct and indirect channels for transmitting the crisis to African economies from the rest of the world, the indirect channels have been more pronounced in their effects largely on account of the structures of these economies. The integration of these economies into the global economy has been largely on account of trade in goods and also the consequence of migration, hence the effects on the real sectors and in remittance flows. There have been significant variations in the impact of the crisis across countries, and this has been influenced largely by the quality of institutions, particularly for regulation, and initial conditions prevailing in the countries.

Abstract:  The global financial and economic crisis, which hit Africa with a lag, has caused serious setbacks to the continent's growth momentum and likely jeopardized hard-won development gains of recent years. Even though most African countries are likely to avoid recession, the sharp drop in growth rates can have serious, long-term consequences, especially for poor and vulnerable Africans. Furthermore, the speed of the continent's recovery and longer-term growth rates remain uncertain. What is, however, remarkable is that unlike in previous crises (as the energy crisis in the 1970s), this time round the response of most African governments has been to continue with the prudent macroeconomic policies of the past decade, and it is these policies that are giving these countries the fiscal space with which to cushion the impact of the global crisis and avoid an even deeper recession. The emergency rescue packages that some countries introduced are also carefully designed to maintain reform momentum in the medium term. At the same time, some countries have used the crisis as an opportunity to accelerate reforms, leaving them in a better position to take advantage of a recovery in the global economy. Thus, while the global crisis has wreaked havoc on African economies, the policy response of most governments demonstrates that the overall policy environment in Africa remains sound. This paper provides three hypotheses to explain this policy response, which stands in some contrast with African governments’ responses to previous crises. First, the prudent macroeconomic stance taken by these countries is simply a reflection of their access to capital markets and thin domestic financial markets. Second, the experience of the past decade, where prudent macroeconomic policies resulted in countries being better able to respond to the crisis, created an environment where governments were reluctant to deviate too far from their macroeconomic stance, lest they be left vulnerable during the next crisis. And third, that there has been a shift in the public's attitude towards economic reforms, and African policymakers were reflecting this shift in their policy responses to the crisis. The paper concludes that if this third hypothesis is the most likely one, it bodes well for Africa's future, despite the global crisis. For it means that economic reforms in Africa will continue and will unlikely be reversed, even with a sluggish global economy, because the public's mind-set has shifted.

Abstract:  The economic crisis has had significant short-term effects in most countries around the world, including those in sub-Saharan Africa. Many of the economies are now expected to begin recovering, although the recovery is anticipated to be protracted, uneven across indicators and countries, and may be fragile. Despite the recovery, will the crisis have long-term consequences for human development and Millennium Development Goal (MDG) achievements in Africa? If so, what are the mechanisms through which such impacts could take place, and what is the role for policy? This paper seeks to address these questions by examining the evidence from similar episodes in the past, and by using a simple framework to assess the long-term impact on human development including trends towards the MDGs. Using growth projections to 2014 for the countries in the region, and a range of observed trends, it models possible impacts on the MDGs, and demonstrates how the crisis could lead to real slow-downs or reversals in the rate of progress. Based on these results the paper suggests that a series of active policy interventions are needed both to accelerate progress towards the MDGs and to build resilience for the future.

Abstract:  The global economy is passing through a period of profound change. The immediate concern is with the financial crisis, originating in the North. The South is affected via reduced demand and lower prices for their exports, reduced private financial flows and falling remittances. This is the first crisis. Simultaneously, climate change remains unchecked, with the growth in greenhouse gas emissions exceeding previous estimates. This is the second crisis. Finally, malnutrition and hunger are on the rise, propelled by the recent inflation in global food prices. This constitutes the third crisis. These three crises interact to undermine the prosperity of present and future generations. Each has implications for international aid and underline the need for concerted action.