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World Economic and Financial Surveys

Regional Economic Outlook:
Sub-Saharan Africa

April 2009

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The global financial crisis has worsened significantly the economic outlook for sub-Saharan Africa. Demand for African exports and commodity export prices have fallen, and remittance flows may be weakening. Tighter global credit and investor risk aversion have led to a reversal of portfolio inflows, less favorable conditions for trade finance, and could lower foreign direct investment. As a result, growth has started to slow markedly and fiscal and balance of payments pressures are mounting. Risks remain high and the prospects for recovery remain uncertain. Financial systems in the region have so far been resilient to the global crisis, but the economic slowdown is likely to increase credit risk and nonperforming loans and weaken financial institutions’ balance sheets. Sub-Saharan African countries should seek to contain the adverse impact of the crisis on economic growth and poverty, while preserving important hard-won gains of recent years, including macroeconomic stability and debt sustainability.

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Contents

Preface
Abbreviations
Main Messages
 
I. The Impact of the Global Financial Crisis on Sub-Saharan Africa
  How Recent Developments in the World Economy Are Affecting Sub-Saharan Africa
  Domestic Developments and Policy Responses Thus Far
  Outlook and Challenges
 
II. Sub-Saharan African Financial Systems and the Global Financial Shock
  Introduction
  Key Messages
  The Global Environment and Transmission Channels
  The Impact of the Crisis on Financial Markets and Institutions
  Risks and Vulnerabilities
  Policy Challenges and Issues
 
Statistical Appendix
References
 
Publications of the IMF African Department, 2005-09
 
Boxes
1.1. The Impact of the Global Slowdown in Africa
1.2. Fiscal Responses to the Food and Fuel Crisis
1.3. The Global Slowdown and Remittances to Africa
1.4. The Impact of Falling Inflows on Africa: Simulation Results
1.5. The Scope for Fiscal Expansion in Sub-Saharan Africa
1.6. The Gleneagles Commitments and the Global Financial Crisis
2.1. Financial Systems in Sub-Saharan Africa: One Size Does Not Fit All
2.2. Nigeria's Financial System and the Spillovers from the Global Crisis
2.3. The Impact of the Global Crisis on Sub-Saharan African Financial Systems: A Closer Look at Emerging and Frontier Markets
2.4. South Africa and the Impact of the Global Financial Crisis
2.5. The WAEMU's Financial Sector in the Face of Global Crisis
2.6. Rapid Credit Growth in Sub-Saharan Africa: Risks and Policy Responses
2.7. Lessons for Sub-Saharan Africa on How to Manage a Banking Crisis
2.8. Deposit Insurance in Sub-Saharan Africa
2.9. The Financial Sector Reform Agenda in Sub-Saharan Africa: What Has Changed with the Crisis?
2.10. Pyramid, Ponzi, and Other Fraudulent Financial Schemes
 
Tables
1.1. Sub-Saharan Africa: Selected Indicators, 2005-10
1.2. Sub-Saharan Africa: Quarterly Inflation by Groups of Countries, 2008
1.3. Sub-Saharan Africa: Non-Oil Primary Fiscal Deficits in Oil Exporters, 2003-08
2.1. Sub-Saharan African Countries: Stock Market Capitalization, End-June 2008
2.2. Sub-Saharan Africa: Issuance of International Bonds, 2004-08
2.3. Sub-Saharan Africa: Countries with Concentrated Foreign Banking Assets, 2008
2.4. Sub-Saharan Africa: Financial Soundness Indicators, 2004 and 2007
2.A1. Country Goupings
2.A2. Sub-Saharan Africa: Claims on BIS Reporting Banks, 2005-2008Q3
2.A3. Cross-Border Liabilities to BIS Reporting Banks, 2005-2008Q3
2.A4. Regulatory Capital to Risk-Weighted Assets, 2004-08Q3
 
Figures
1.1. The Global Financial Crisis and Its Impact on Africa
1.2. A Comparison of Growth
1.3. Growth in Sub-Saharan Africa
1.4. Sub-Saharan Africa: Core Inflation in Selected Countries, 2008
1.5. Sub-Saharan Africa: Changes in Monetary Policy
1.6. Sub-Saharan Africa: Real Interest Rates in Selected Countries
1.7. Sub-Saharan Africa: Overall Fiscal Balance, Including Grants
1.8. Terms of Trade in Sub-Saharan Africa, 2007 and 2008
1.9. Sub-Saharan Africa: External Current Account Balance, 2007 and 2008
1.10. Sub-Saharan Africa: Changes in International Reserves since September 2008
1.11. Sub-Saharan Africa: Real Effective Exchange Rates in Oil Exporters and Oil Importers by Exchange Rate Regime
1.12. Sub-Saharan Africa: Current and Previous Forecast for 2009
1.13. Sub-Saharan Africa: Economic Outlook, 2009-10
1.14. The Impact of the Global Financial Crisis on Sub-Saharan Africa
1.15. Sub-Saharan Africa: Growth Prospects
2.1. Sub-Saharan Africa and Comparator Groups: Financial Depth Indicators
2.2. Selected African Countries: Stock Market Index
2.3. Emerging Markets CDS and EMBI Spreads
2.4. Selected African Countries: Exchange Rates
2.5. Total Foreign Assets and Foreign Liabilities of Deposit Money Banks in the African Region, 2005-08
2.6. Sub-Saharan Africa: Net Claims of BIS Reporting Banks, End-September 2008
2.7. Sub-Saharan Africa: Private Credit by Deposit Money Banks
2.8. Sub-Saharan Africa: Bank Credit to the Private Sector and Deposits
2.9. Sub-Saharan Africa: Gross Assets and Liabilities, 2001-06
2.10. Sub-Saharan Africa: Net Direct Investment and Other Assets and Liabilities (net) Positions, as of 2006
2.11. Sub-Saharan Africa: Nonperforming Loans, 2004 and 2007
2.12. Sub-Saharan Africa: Liquid Assets, 2004 and 2007
2.13. Sub-Saharan Africa: Regulatory Capital, 2004 and 2007