Africa and the Global Economic Crisis: A Risk Assessment and Action Guide

Abstract

It is increasingly apparent that, despite earlier hopes, the global economic crisis will have a significant impact on the economies of Sub-Saharan Africa. In order to co-ordinate and craft the most appropriate responses for African economies to withstand and recover from the crisis, it is necessary to identify the degree to which the continent, as well as the individual African countries, is at risk of being negatively impacted. This depends on both vulnerability to trade and financial shocks, as well as the resilience of countries to cope with these shocks. Accordingly, vulnerability and resilience indices are constructed for the continent and individual countries. It is shown that, of all developing regions, Africa is the most at risk from the crisis: it has higher vulnerability to trade and financial shocks, and it has the least resilience of all regions. Based upon a vulnerability-resilience matrix, the African countries most at risk are the Democratic Republic of the Congo, Burundi, Côte D’Ivoire, Liberia, Angola, the Sudan, Chad, Guinea-Bissau, Guinea, Zimbabwe, Somalia, Kenya, Mali, Nigeria, Ghana, Cape Verde and Mauritania. With a few notable exceptions, such as Kenya and Ghana, these are all ‘fragile states’. Based upon the distinction between vulnerability and resilience, an action guide is proposed. This makes a distinction between short-term and longer-term actions, in particular be-tween actions aimed at mitigating the impact of the external shocks, assisting countries to cope, and actions aimed at reducing risk.