Johannesburg - Despite some challenges, Africa
is still looking better than it has for years, economic research and
forecasting company IHS Global Insight said on Thursday.
IHS Global Insight chief economist Nariman Behravesh said that while no
country will be left untouched by the global economic slowdown, Africa was
unlikely to be paralysed by the downturn.
"The tone for Africa is much better than it has been for a long time,"
said Behravesh.
Plummeting commodity prices in the wake of the financial crisis has left
Africa - a major commodity exporter - vulnerable, but the promise of
recovering metals prices positions it ahead of some its emerging market
peers in terms of time to recovery.
The weak economic activity in advanced industrialised and some emerging
market nations dragged down commodity prices in both oil and non-oil
producing countries in Africa, said IHS Global Insight regional managing
director for sub-Saharan Africa Karanta Kalley.
In the four years to mid-2008, commodity prices climbed by 300% with
copper and uranium prices quadrupling, oil prices tripling and gold and coal
prices doubling.
"This propelled African growth to rates not seen in 30 years," said
Kalley.
Then the global crisis hit and weak global growth resulted in demand for
commodities declining significantly.
While Africa's banks survived the first-round effects of the financial
crisis because of their low integration with global institutions, the global
recession has dampened tourism revenues, aid flow, remittances and foreign
direct investment.
Investors got nervous about their own economies and therefore about
other markets, said Kalley, adding that FDI has not completely collapsed but
rather slowed.
As a result African real GDP growth in 2009 is expected to be the lowest
since 1993.
"Growth is anaemic after 2007's growth was the highest in 30 years,"
Kalley said.
Oil-producing countries have been the hardest hit, but even the non-oil
producing countries in Africa are registering negative growth.
Kalley said while inflation was declining around the world it was
increasing in Africa. He also pointed to shrinking trade, current account
and fiscal balances as well as declining capital inflows and the nosedive in
remittances.
But despite this, he said the gloom in no way spelled doom for
investment on the continent.
"This is a global cyclical downturn and no region is spared," said
Kalley, adding that it was not of Africa's making.
What the recession has shown is that Africa's integration into the world
economy, although slow, will increase the region's vulnerability to these
global shocks and similarly, excessive dependence on export of primary
commodities will make the region more susceptible to such downturns.
- I-Net Bridge