WASHINGTON (Reuters) - Sub-Saharan Africa is proving surprisingly resilient in emerging from the global financial crisis compared with previous downturns, the African Department Director at the International Monetary Fund said on Friday.
Just a year ago the IMF warned that Africa was to face major setbacks as the fallout spread from the global economic downturn. But the poorest countries of the region rebounded with greater strength and speed than predicted, Antoinette Sayeh told Reuters. Some economies avoided contraction all together in 2009.
Just last year, IMF Managing Director Dominique Strauss-Kahn described the region's economies as "an innocent victim of this global financial tsunami."
Economic growth in sub-Saharan Africa is expected to double this year and further accelerate in 2011 as long as the global economy continues to improve.
Regional output is projected to expand by 4.75 percent in 2010 compared with 2 percent last year, stronger than Latin America, and Middle East and North Africa regions.
Sub-Saharan Africa's growth could reach 5.75 percent next year if global conditions advance.
"We see positive developments across the region and certainly in the context of what we have seen in response to the crisis and efforts made to sustain economic growth," Sayeh said. "We have seen good progress in most sub-Saharan African countries; that is encouraging to potential investors."
The stronger macroeconomic position and the limited integration of many countries in the region into the world economy shielded them from the global recession.
"On average, Africa did better but there were groups of countries that were hit by the crisis -- those were the most advanced, and oil exporting countries. These countries are recovering fast," she added.
The 29 smaller and more fragile countries, with a combined population of 750 million, did better than expected, "which is encouraging because those are the ones can least afford not to grow and make progress."
Africa is becoming one of the main destinations for frontier market investors looking for high growth while assuming the risk of small and sometimes volatile economies.
Sayeh said the region avoided much of the downward pressure from the crisis because of counter-cyclical economic policies pursued in many countries.
"Nearly two-thirds of countries experiencing a slowdown in 2009 were able to increase government spending to buttress economic activity. Policy interest rates were also reduced in most countries," except where this would have been harmful because of exchange rate regimes or inflationary pressures.
Republic of Congo is expected to growth the fastest, at 12.1 percent this year, while Madagascar is the only country in the region to post a contraction, with output expected to decline 1 percent.
Economic growth in middle-income and oil-exporting countries was hurt by the sharp fall in export volumes and a slump in oil prices in early 2009 as world demand collapsed.
Sayeh said there is a need to address the problems in the financial sector, mentioning Nigeria's $4 billion bailout of nine weakly-capitalized financial institutions last year.
"There has been a big effort to restructure the banking sector, and the Fund has been very involved in supporting the good efforts on the part of the government to get the financial sector resolution underway," Sayeh said.
Nigeria, the second largest economy in the region, is in the process of passing the Asset Management Company legislation, which would soak up bad bank loans.
"We expect it to be put in place in May. There has been good progress starting to roll that out in May if possible," Sayeh said.
"Going forward, it will be critical that other development partners and international financial institutions continue to support sub-Saharan African countries during the recovery," Sayeh said.
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