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2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
2010:Recovery from the Global Crisis: Implications for SADC and Development Finance
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2010:Recovery from the Global Crisis: Implications for SADC and Development Finance

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  • 1. Recovery from the Global Crisis: Implications for SADC and Development Finance Keith Jefferis May 2010
  • 2. Remember early 2009 ….
    • World Economy
    • Financial crisis
    • Freezing of credit markets
    • Sudden plunge into deep recession
    • Collapsing commodity prices
    • Concern about prolonged depression
    • Rising unemployment
    • Bank rescues and fiscal injections
    • SADC/SSA
    • No financial crisis, but concern about knock-on effects of global crisis, via
      • Trade
      • Capital/financial flows
      • Risk aversion
    • Macroeconomic concerns
      • Growth slowdown
      • BoP
      • Fiscal problems
      • Poverty
  • 3. Global growth slowdown ... and recovery
    • Depths of recession – 4Q2008 and 1Q2009
    • Recession was deep, but recovery has been robust
    • Fears of prolonged depression not realise
    • Global growth projected to settle in 3% - 4% range in 2010-11
  • 4. Emerging markets leading the recovery
    • Recovery has been driven by emerging markets
      • Faster emergence from recession
      • Higher growth during recovery
    • Less affected by financial crisis and debt problems – more resilience
    • Developed economies – sluggish recovery:
      • Fiscal/debt problems
      • Unemployment
      • Euro-zone crisis
  • 5. South Africa lagging other EMs, but recovering
    • South Africa’s recession has been comparable in depth to Emerging Markets generally, but:
      • SA lagging general EM recovery
      • SA growth expected to be reasonably robust in 2010, due partly to World Cup effect
      • Growth projected to weaken going into 2011
  • 6. Signs of recovery ... minerals prices
    • Copper
    • Nickel
  • 7. … and oil prices
  • 8. Economic Developments in Sub-Saharan Africa
  • 9. SSA Economic Outturn
    • Greater resilience than expected
      • Growth slowdown relatively modest
      • Quick recovery expected
      • Macroeconomic stress manageable
    • Greater impact on middle income countries, more integrated into global markets
    Source: IMF REO SSA April 2010
  • 10. Why such a modest economic impact on SSA?
    • International
    • Quick and robust global recovery in growth, trade & commodity prices
    • SSA growth slowdown driven by reduced demand, not banking crises
    • Emerging market growth -> commodity prices
    • Recovery in financial flows
    • Domestic
    • Prior reforms and restructuring -> many countries started from strong macroeconomic position
    • Prior fiscal reforms enabled fiscal stimulus
    • Appropriate monetary policy response – inflation not a major concern
    • Resilient financial systems
    • Contrast with previous crises
  • 11. Finance & Capital Markets
    • Central to economic problems in developed markets – and transmission of those problems around the world
      • Credit crunch
      • Risk aversion
      • Market collapses
    • Impact short-lived
      • Only small decline in remittance inflows
      • Development assistance: overall flows held up, especially with boost from MFIs
      • Recovery of risk appetite
      • Resurgence of portfolio flows to EMs – low returns in major markets
      • SSA role of FDI – less volatile than short-term flows
  • 12. But of course there are problems…
    • Fiscal & Debt conditions
      • Limited fiscal space
      • Needs to be carefully managed
    • Partial but not full recovery in global demand
      • Well below trend
    • Employment & Incomes
      • Rising unemployment
      • Household income squeeze
    • Poverty alleviation/MDGs
      • Setbacks/delayed achievement
    • Fragile states
      • Especially vulnerable
  • 13. Economic Outlook - SADC
  • 14. Inflation: much reduced, not a major concern, allows monetary policy easing Source: IMF REO for SSA (April 2010) 46%
  • 15. Real GDP growth – recession mostly avoided in 2009, strong recovery projected for 2010 Source: IMF Regional Economic Outlook, April 2010
  • 16. Fiscal balance: some large deficits, esp. in SACU, but generally manageable
  • 17. Current account: some large deficits, and dependence on capital inflows Source: IMF Regional Economic Outlook, April 2010
  • 18. Reserves: some declines, but still comfortable in most countries Source: IMF Regional Economic Outlook, April 2010
  • 19. Outlook & risks – world economy
    • More positive than a year ago
      • Worst fears of depression appear not to be realised
      • International recovery under way
      • Recovery in financial and commodity markets
      • BUT volatility and uncertainty still apparent in currencies, commodity markets
      • “ Double –dip” recession cannot be ruled out
    • Medium-term outlook still uncertain
      • End of inventory-driven upturn
      • Duration of impact of fiscal stimulus
      • Consumer confidence
      • Lagging impact of rising unemployment
      • Financial sector uncertainty – re-regulation
      • De-leveraging
      • Rising long-term interest rates & crowding out of private investment
  • 20. Outlook & risks …. SADC
    • Positive
    • Africa growth should resume pre-crisis trajectory – helped by higher global growth
    • Resource rich – benefit from resumption of commodities boom
    • Focus can now change – from short-term output stabilisation to medium-term development challenges
    • Negative
    • Slow growth in Europe – major export market
    • Global growth – still vulnerable
    • Limited growth of donor resources, especially bilateral
    • Commodity price volatility
    • Slow progress on regional integration
    • Energy shortages
  • 21. Implications for DFIs
    • Finance is at the centre of attention
    • SADC financial systems generally stable
    • Recognition that markets and commercial FIs cannot achieve everything
    • Many African countries still by-passed by commercial flows
    • Banks still cautious
    • Recognition that particular development gaps exist – infrastructure, SMMEs, agriculture, unbanked – that may have to be filled by DFIs
    • Scope for more stable view of risk
    • Improving domestic bond markets
    • AfDB – AFMI
    • Government resources constrained
    • More resources from MFIs
    • Opportunities in new technologies & partnerships (MFIs, telcos, donors)
    • Regulation?
  • 22. Thank You

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