Weaker global trade and financial integration shielded the Sub-Saharan Africa from a more severe collapse of trade and credit in 2008/09.
Although the region showed a slowdown in economic growth of 2.8 per cent in 2008, growth picked up by five per cent in 2009.
The international ratings agency, Fitch Ratings, said the region’s resilience was largely due to domestic factors such as a strong pre-crisis growth, economic liberalisation and strengthening of public investment.
Also counting in its favour was increased investor interest, especially in South Africa, and frontier markets.
Similarly, most stock markets had recovered to close to pre-crisis levels by the end of 2010, with the exception of Nigeria.
The Fitch Ratings said recovery of global trade and growth, tourism, private capital investment and a sustained recovery in commodity prices led to a rapid recovery.
In many cases, public debt remained relatively low and manageable, while lower inflation allowed many of the region’s countries to maintain looser monetary policies for a longer period during 2010.
The latest International Monetary Fund (IMF) world economic outlook forecast in April suggested that the region’s growth would reach 5.5 percent this year.
This was reflected in the gradual recovery in developed OECD economies and the continued growth of China’s economy.
China has contributed to the expansion and diversification of the region’s trade flows, which expanded four-fold from US$170 billion to US$660 billion in 2008, which is an average of 19 per cent, as opposed to a pre-crisis 14 per cent.
Most of the exports were extractive, mainly oil and metals, although other commodities like cotton and timber were also exported. The Fitch Ratings report suggested that the exploitation of the region’s vast untapped mineral resources will continue to be a major growth driver.
However, the rapidly rising global food and fuel prices could dampen growth by reducing the purchasing power and tightening monetary policy.
And, said the report, the challenge for sub-Saharan African countries is the lack of sufficient infrastructure that has not kept up with the growth in demand.
The World Bank has estimated that the region needs to spend US$93 billion per year or 15 per cent of the region’s Gross Domestic Product (GDP) to close the infrastructure gap. The average spending has only risen to about US$45 billion per year, leaving a funding gap of about US$31 billion.
The IMF has, in response, started to raise non-concessional external borrowing ceilings for the region, which requires them to meet debt sustainability criteria and have adequate debt management capacity.
The IMF also suggested that structural reforms must continue to improve the effectiveness of public investment.
The Fitch Ratings report said although the picture in the region is brighter than it has been in decades, poor infrastructure and governance, coupled with the need to boost the business environment, remains a challenge.
“Vested interests often hinder reforms, while weak public sector governance hampers infrastructure investment, and poor accountability leads to weak service delivery outcomes,” the report stated.