posted on april, 2009
Source: BBC News

By Walker Economics correspondent, Dar-es-Salaam, Tanzania

Africa is a long way from the eye of the global financial storm. But there are early signs of the international economic winds doing damage to the continent.

Many African countries have seen a real revival of economic growth in the last decade. Those gains could be in danger.

The International Monetary Fund (IMF) is certainly worried, and along with President Kikwete of Tanzania, has convened a conference on the problem in Dar-es-Salaam, to run from Tuesday to Wednesday.

Less than a year ago, the IMF's forecast for sub-Saharan Africa was economic growth of 6.7% in 2009.

Its most recent projection is sharply lower, between 3% and 3.5%.

That translates into very weak growth in output per person, which is a rough measure of average living standards.

To get some perspective on how much difference this makes, suppose the population of the region continues to grow at 2.4%, as it did in 2007.

With economic growth of 3% it would take 118 years to double output per person.

But at 6% economic growth it would take 20 years. At 9% - the kind of performance China has achieved in recent years - it would take just 11 years.

Oil price impact

The good news for Africa is that it has little direct exposure to the credit crisis. African banks have not invested much, if at all, in the problem financial assets at the heart of the crisis.

The fall in the global price of copper has hit Zambia

It might also help that a large share of the region's economy is agriculture for domestic markets, which is less exposed to the international storms.

But there are likely to be several indirect effects.

The global downturn has undermined demand for many industrial commodities, which are important exports for several African countries.

This includes oil in Nigeria, Angola and Equatorial Guinea, and copper in Zambia.

Prices of both have fallen sharply since last summer.

Crude oil is down by about 70% from its peak last July, and copper by about two-thirds.

These developments are, however, helpful for those countries that are importers of these commodities.

There are many anecdotal reports of other exports also being affected by weaker demand from the rich countries, including cut flowers and textiles.

Vital funds

Remittances, money sent home by people working abroad, also look vulnerable.