A new World Bank report says economic growth in developing countries remains robust, despite high food and energy prices and financial turmoil in rich nations. But the Global Development Finance 2008 report warns that the poor are not benefiting from that growth and says there’ll be some slowdown in world economic growth.
Mick Riordan, senior economist for the World Bank, spoke to VOA English to Africa Service reporter Joe De Capua about current economic conditions.
“It’s almost a percent storm, isn’t it? We have difficulties in financial markets continuing, slowdown in the rich countries in part tied to the sub-prime mortgage crisis in the United States. And on top of that now we have the escalation in oil prices to almost $140 a barrel and of course food prices just moving out of reach of the poor in Africa. Against this background we seeing from 2007 to 2008 that world’s growth would slow by a full percentage point. That’s to 2.7 percent in (20)08. For the United States, a full percentage point once more. And for the industrial countries, if we call them that, for the US down to 1.1 percent. Developing (countries) a bit more because the hit that developing countries are taking, although still within a context of stronger growth, is a bit more in percentage terms,” he says.
Riordan adds, “The more interesting aspect is that for sub-Saharan Africa we see an acceleration of growth into 2008 despite all of these factors attacking the outlook, if you will. (An acceleration) from growth of 6.1 percent in 2007 -- this is for sub-Saharan Africa -- to 6.3 percent. And that’s quite unusual. It bucks the trend of most emerging market regions in 2008.”
How can there be such economic growth in the midst of soaring oil and food prices? The World Bank senior economist says, “One of the ironies given the mix of countries in the region is that oil prices increasing are good for sub-Saharan Africa as a whole because you have very large countries like Nigeria and, to a lesser extent, countries like Gabon, Cameroon and Angola, which has come on stream this year with a huge growth rate of 22 percent. So, those numbers, aside from South Africa, tend to dominate the overall growth picture for the region.”
Nevertheless, he points out that soaring food prices are bad for both the oil exporters and importers in Africa. “Most countries tend to be food exporters. But even with the increase in prices that we’re seeing for some of these food commodities, it’s still the rural farmers who may not benefit from the increase in the international price. And of course the urban consumer in most African countries will be hit quite hard,” he says.
While progress had been made in recent years in controlling inflation through new policies, inflation is “rising across the sub-continent tied to the food and fuel prices. That’s eroding people’s purchasing power and putting something of a damper on investment…. We think things are going to turn down in 2009…coming back a bit in 2010.”
Riordan says shortages and speculation have played a role in the current financial turmoil. But he says, “There are some fundament factors particular in the oil market, where there is a disappointment on the supply side for the non-OPEC countries, a shortfall was what was expected on oil supply. At the same time, demand, because of the high prices, is slipping in the rich countries and it’s rising only moderately in countries like China and India. So you do have that fundamental supply imbalance, but it’s not anywhere significant enough to push oil to $140 a barrel.”
He says that there is much speculation going on now and that US regulators will be looking into “loopholes” allowing corporations to “bet lots of money on which direction these prices will be going.” Still, he says, not enough to “trigger this logarithmic curve, if you will, that we’ve seen over the last several months.”