Africa's economic growth is projected to be 3.5 per cent in 2009 as a result of the ongoing global financial meltdown, the food and fuel crises, World Bank Vice President for Africa has said.
In a paper presented by Ms Obiageli Ezekwesili and made available to GNA by the World Bank Office in Accra, the Bank's Vice President for the Africa Region said, African exports were expected to fall by two per cent in 2008, relative to 2007, with some countries - Angola, for example, experiencing a 30 per cent decline.
Africa's oil exporters, erstwhile basking in the bonanza, now face terms of trade shocks equivalent to losing 15 per cent of Gross Domestic Product (GDP) in 2009. Other mineral exporters (who are oil importers), such as South Africa, Zambia and Ghana are looking at negative terms of trade shocks of two to four per cent of GDP. South Africa is estimated to have lost about 64,000 mining jobs over the last few months.
The Vice President said: "Revenue flows from tourism are slipping and remittances drying up. Kenya has already lowered its growth rate of remittances in 2008 from 11.1 percent to 5.4 percent. The projected growth in 2009 is zero. The growth rate of international arrivals to Africa has already slowed down to 4.2 per cent in 2008 compared to 7.5 per cent in 2007."
Ms Ezekwesili said: "In Mauritius, tourism revenues were by 27 per cent lower in November 2008, compared to a year ago. The impact of the decline will be huge for a country like Seychelles, where tourism accounts for 2 percent of GDP, employs about 30 percent of the labor force, and provides more than 70 percent of hard currency earnings.
She suggested that working with its development partners, African governments must take action to prevent what started as a financial crisis and grew into an economic crisis from becoming an employment and human crisis.
"There will be pressure to slow or reverse reforms; temptations to opt for interventionist policies over assuming a more rigorous regulatory role; avoid potentially rewarding but politically suicidal policy choices.
"Without doubt, not all reforms will pay dividends or work in every context. Yet, economic and financial reforms must remain a top priority. The successful implementation of such reforms was the main reason for optimism about the region's prospects. This is not the time to abandon, or even slow down, reforms."
Ms Ezekwesili said growth slowdown would be accompanied by a decline in fiscal revenues and the kind of fall in public expenditure generally associated with times of fiscal stress. So, reforms aimed at improving the efficiency of public expenditures, such as the removal of untargeted subsidies in favor of subsidies going to the poor, would be increasingly important.
Utility reform and regulation of infrastructure would become critical as declining public revenues put pressure on loss-making public utilities. Reforms that protect spending on infrastructure operations and maintenance would cushion the fall in growth and leave the economy better able to take advantage of the rebound of the global economy, not if, but when it occurs, she said.
Ms Ezekwesili said; financial sector reform that made the banking system more transparent and accountable would be important to avoid knock-on effects of the global financial crisis; adding; "macroeconomic stability, which has enabled Africa to sustain and accelerate growth over the last decade, will need to be preserved so that the impact of the global crisis is not exacerbated in the domestic economy. Some countries may have the space to undertake a modest fiscal stimulus to keep growth from falling too fast, but it should be done in such a way that government spending does not crowd out private spending".
She said: "Working with development institutions and bilateral donors, African countries must continue to improve accountability and transparency in the use of their domestic resources - especially income from natural resources - as well as demonstrate the effectiveness of development aid adding that aid worked best if it complemented trade in a global economy that could only be further bruised by protectionism.
Ms Ezekwesili said: "Africa needs to stay the course of reforms. Most of these will remain demanding but, ultimately, very rewarding. It is the price Africa must pay to stir itself out of the eye of a financial storm it bears no responsibility for bringing about, yet must help resolve in what the food, fuel and financial crises have proved is, indeed, a globalized world."