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The Global Financial Crisis and Recession

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  • Maswana, Jean-Claude

Abstract

This article analyzes how the global financial crisis is affecting African economies and identifies risks ahead with respect to prospects for development. Preliminary assessment shows that the aftershocks of the global meltdown have affected African economies through declines in exports of primary commodities and the relative price of exports, capital inflows, and investment in the infrastructure on which future growth depends. In addition, government revenues are dwindling. Combined with rapidly rising unemployment, the decline has weakened the fragile safety net and caused living standards in most countries to deteriorate. The global recession has served as a reminder that African success stories are still very fragile. The ongoing global rebalancing may negatively affect economic growth prospects in Africa. Short-term policy should therefore focus on expanding fiscal space, rehabilitating physical infrastructure using labor-intensive techniques, and providing social safety nets, such as employment protection. The challenge for Africa should not consist simply of ensuring that national economies return to the precrisis commodity export–led type of growth but that the drivers of growth switch to a more value chain–based and intra-African trade–driven pattern. Addressing the challenges of African postcrisis development requires policies that strengthen the resilience of African economies to external shocks, by investing massively in infrastructure.

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File URL: http://hdl.handle.net/10685/33
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File URL: http://repository.ri.jica.go.jp/dspace/bitstream/10685/33/1/JICA-RI_WP_No.15_2010.pdf
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Bibliographic Info

Paper provided by JICA Research Institute in its series Working Papers with number 15.

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Date of creation: 07 Mar 2010
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Handle: RePEc:jic:wpaper:15

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Keywords: Global financial crisis ; recession ; development ; Africa ; current account adjustment;

References

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  1. Hamid Faruqee & Douglas Laxton & Dirk Muir & Paolo A. Pesenti, 2007. "Smooth Landing or Crash? Model-Based Scenarios of Global Current Account Rebalancing," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 377-456 National Bureau of Economic Research, Inc.
  2. Maurice Obstfeld & Kenneth Rogoff & Richard Clarida, . "The Unsustainable US Current Account Position Revisited," Working Paper 14901, Harvard University OpenScholar.
  3. Gian Maria Milesi Ferretti & Assaf Razin, 2000. "Current Account Reversals and Currency Crises: Empirical Regularities," NBER Chapters, in: Currency Crises, pages 285-323 National Bureau of Economic Research, Inc.
  4. repec:fip:fedgws:y:2009:i:feb is not listed on IDEAS
  5. repec:fip:fedgws:y:2009:i:jul is not listed on IDEAS
  6. Kasekende Louis & Brixova Zuzana & Ndikumana Leonce, 2010. "Africa: Africa's Counter-Cyclical Policy Responses to the Crisis," Journal of Globalization and Development, De Gruyter, vol. 1(1), pages 1-22, January.
  7. Vincent Castel & Taoufik Rajhi & Desire Désiré Vencatachellum & Nooman Rebei & Abdul Kamara & Nirina Letsara, 2009. "Working Paper 98 - Africa and the Global Economic Crisis: Strategies for Preserving the Foundations of Long-Term Growth," Working Paper Series 234, African Development Bank.
  8. David Rosnick & Mark Weisbrot, 2007. "Political Forecasting? The IMF's Flawed Growth Projections for Argentina and Venezuela," CEPR Reports and Issue Briefs 2007-10, Center for Economic and Policy Research (CEPR).
  9. Wim Naudé, 2009. "Fallacies about the Global Financial Crisis Harms Recovery in the Poorest Countries," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 10(4), pages 3-12, 01.
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