The economy in 2009: Growth could slow down, poverty reduce

By Independent Team

Economic growth in sub-Saharan Africa is expected to moderate in the face of the financial turmoil, especially as terms of trade gains from the surge of commodity prices moderate.

Overall, growth is projected to decline from 7% in “07 to 6% in 2008-09. South Africa, the region’s largest, most open economy, will suffer further slowdown in growth as exports and consumption falter even as it needs to finance a wide current account deficit

Roubini Global Economics (RGE Monitor) of top economics professor and analyst Nouriel Roubini, former senior advisor to the International Monetary Fund (IMF), makes these predictions and more about the economic outlook for 2009.

Since 2004 RGE Monitor intelligence has been generated and used by internationally-known experts to establishing direction, executing transactions, and influence decisions.

It says despite the best recorded economic activity in Africa occurring in recent years, supported by rising commodity production and exports, with higher foreign investments and official aid rather than credit growth, the global financial crisis may depress aid even as remittance flows also suffer.

Quoting the Economist, it says despite the credit crunch in the rich world’s financial markets, in sub-Saharan Africa there is little sign of any reduction in a growth rate that has averaged over 5% a year for the past decade.

It has been predicted that the global economy will contract this year for the first time in decades.

The Institute of International Finance (IIF), the Washington- based association representing more than 375 of the world’s major banks and financial institutions, projected the world economy would shrink 0.4 percent in 2009, after 2.0 percent growth in 2008.

The IIF, in its monthly Global Economic Monitor, has predicted “œthe most severe, globally synchronised recession in modern economic history,”

Mature economies-the United States, the 15-nation eurozone and Japan-that are now in recession were forecast to contract a hefty 1.4 percent amid the worst financial crisis since the Great Depression.

The US economy, the world’s largest and the epicenter of the financial tsunami, would shrink 1.3 percent in 2009 after growth of 1.2 percent this year, according to the IIF projections.

The eurozone would contract more sharply, by 1.5 percent from 0.9 percent growth, and Japan would shrink 1.2 percent after zero growth.

The sharpest markdown was for the emerging economies, including powerhouses China, India, Brazil and Russia.

Those engines of global growth had resisted the impact of the credit crunch gripping the advanced economies until the mid- September financial firestorm, the IIF said.

The IIF forecasted economic growth in emerging markets would brake to 3.1 percent in 2009 after a 5.9 percent gain this year.

The World Bank has also forecast a significant decline in global economic growth in 2009 for both developed and emerging countries.

In a report assessing economic prospects, the Bank has predicted that the world’s annual economic growth will slow to 0.9 per cent, from 2.5 per cent this year.

The Bank’s chief economist, Justin Lin, said the financial crisis “œhas eased tensions in commodity markets, but is testing banking systems and threatening job losses around the world”.

It also warns that capital flows to developing countries are shrinking fast, reducing the level of investment, while the slowdown in world trade is likely to cut into their export markets.

Despite the current crisis, the Bank says that the long-term growth prospects for developing countries remain strong, and this will lead to substantial reduction in world poverty rates by 2015, with just 15 per cent of people living on less than $1.25 per day, compared to 25 per cent in 2005.

However, it warns that severe poverty in sub-Saharan Africa will fall less quickly, with 37 per cent still living on $1.25 per day by 2015.