African Future, 9 October - While economic growth projections for Africa in 2009 remain quite optimistic, the continent is set to feel a negative impact of the global financial crisis. Credits will be more difficult to obtain and development aid transfers are set to be reduced.

The International Monetary Fund (IMF) has presented a very negative outlook for the global economy, warning that the hardships of the 1930s could return in parts of the world. "The world economy is experiencing a major downturn in the face of the most dangerous financial shock in mature markets since the 1930s," the Fund warned yesterday evening.

In its 'World Economic Outlook' report, the IMF projects global growth year on year to "slow sharply to 3.9 percent in 2008 from 5.0 percent in 2007, and continue slowing to 3.0 percent in 2009." For next year, the Fund thus has reduced its growth projections by almost 1 percent, on a global scale.

However, Africa and the Middle East are the two regions where growth projections for 2009 were reduced less; by 0.5 and 0.1 percent respectively. The Fund still foresees an overall GDP growth for all Africa of 6.0 percent in 2009, and of an optimistic 6.3 percent for sub-Saharan Africa next year.

No reason for worries in Africa then? Indeed, several African countries may even profit from the crisis on a short term. As investors shy away from banks and stock markets, safe investments such as gold and diamonds already have become the new trend; boosting prices for these minerals produced in many African countries. Also, reduced oil - and maybe even food - prices may profit many African consumers and producers.

But there are also many clouds on the African sky. The immediate effect of the financial crisis, with its acute shortage of cash, also strains the banking sector in Africa. In Egypt, authorities have had to announce a guarantee for personal bank savings to assure the survival of the banking sector. Other African governments are expected to follow, and some of them may head into trouble when having to realise these guarantees if national banks go bankrupt.

Another danger is the immediate lack of cash to realise new credits to African countries, businesses and consumers. The African banking system is deeply connected to the world financial market, where the shortage of US dollars is acute. Many planned projects and investments may have to be put on ice or become more expensive due to this current lack of cash.

But also on the longer run, development projects may not only be hindered by the immediate cash shortage. A far greater danger is that Africa's development partners in the Western world - the same countries the IMF expects to be worst hit by the upcoming recession - will back down on their commitments. This is not a speculation; it has already started.

The first major donor country to reduce its development aid pledges was Spain; the European country worst hit by the collapse in the property market and now experiencing a spiralling unemployment rate. Ireland was the second big donor to follow, also following a national economic recession. And these to European countries are headed by governments sincerely dedicated to Africa's development and international solidarity.

Other donors are expected to follow, including the giants USA, UK and Germany. "New donors" from Eastern Europe, which according to the IMF will be severely hit by the crisis, will be forced to pause their plans to massively increase development aid budgets. There are therefore few signs that Western nations will fulfil their pledges to aid Africa to reach the Millennium Development Goals - pledges that have be postponed several times and were only expected to reach their full size by 2009-10.

Finally, some African countries may be affected by the already registered downturn in consume in the rich world. As insecurity has set in and recession is expected, Western consumers have already started to change their behaviour, cutting down on expensive travels, property investments and luxury goods. African tourist destinations - normally expensive to reach - must expect to face severe reductions in arrivals, and those seeing a booming tourist property market may become even harder hit.

Despite these dangers, analysts agree that the African continent will be one of the least affected by the current financial crisis. But the continent may see large changes in which economies are successful and which are heading downwards, depending on their dependence on international finance, donors, main economic sectors and governance. Turbulent times are in any way set to come, necessitating competent national governments.

By Rainer Chr. Hennig

© afrol News

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