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Tuesday, April 6, 2010

The Global Economic Crisis: Impact on Sub-Saharan Africa and Global Policy Responses

Alexis Arieff
Analyst in African Affairs

Martin A. Weiss
Specialist in International Trade and Finance

Vivian C. Jones
Specialist in International Trade and Finance

Sub-Saharan Africa has been strongly affected by the global recession, despite initial optimism that the global financial system would have few spillover effects on the continent. The International Monetary Fund (IMF) estimated in 2009 that average economic growth in Africa would slow to 1%, from an annual average of over 6% to 1% over the previous five years, before rebounding to 4% in 2010. As a region, Africa is not thought to have undergone a recession in 2009. However, most African countries are thought to require high rates of economic growth in order to outpace population growth and make progress in alleviating poverty. 

The mechanisms through which the crisis has affected Africa include a contraction in global trade and a related collapse in primary commodity exports, on which many countries are dependent. Foreign investment and migrant worker remittances are also expected to decrease significantly, and some analysts predict cuts in foreign aid in the medium term if the crisis persists. Africa's most powerful economies have proven particularly vulnerable to the downturn: South Africa has experienced a recession for the first time in nearly two decades, and Nigeria and Angola have reported revenue shortfalls due to the fall in global oil prices. Several countries seen as having solid macroeconomic governance, notably Botswana, have sought international financial assistance to cope with the impact of the crisis. At the same time, a number of low-income African countries are projected to experience relatively robust growth in 2009 and 2010, leading some economists to talk of Africa's underlying economic resilience. 

The 111th Congress has monitored the impact of the global economic crisis worldwide. The Supplemental Appropriations Act, 2009 (P.L. 111-32), provided $255.6 million for assistance to vulnerable populations in developing countries affected by the crisis. While an initial House report indicated several countries, including five in Africa, should receive priority consideration, the subsequent conference report did not specify recipients. In August 2009, the Obama Administration notified Congress that four African countries—Ghana, Liberia, Tanzania, and Zambia—would benefit from the funds appropriated in the supplemental. More broadly, U.S. policy responses to the impact of the crisis overseas have focused on supporting the policies of multilateral organizations, including the IMF, the World Bank, and the African Development Bank (AfDB). These organizations have increased their lending commitments and created new facilities to help mitigate the impact of the global crisis on emerging market and developing countries worldwide. 

This report analyzes Africa's vulnerability to the global crisis and potential implications for economic growth, poverty alleviation, fiscal balances, and political stability. The report describes channels through which the crisis is affecting Africa, and provides information on international efforts to address the impact, including U.S. policies and those of multilateral institutions in which the United States plays a major role. For further background and analysis, see CRS Report RL34742, The Global Financial Crisis: Analysis and Policy Implications, coordinated by Dick K. Nanto.


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Date of Report: April 6, 2010
Number of Pages: 34
Order Number: R40778
Price: $29.95

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