“We are now facing new challenges, not of advanced economic slowdown but rather emerging market slowdown,” said Min Zhu, deputy managing director of the International Monetary Fund (IMF) on Friday.
He said that most African countries experienced good growth over the recent years despite the global financial crisis due to their strong macroeconomic policy framework which served as a buffer against the crisis.
However, as Europe undergoes a protracted recession, it has impacted quite harshly on Africa’s commodities export industry, particularly since Europe is one of the biggest importers of African produces.
“African countries will need to adjust their export strategies by exporting to other regions and diversifying their goods as they are more focused now on commodities,” said Zhu.
He pointed out that the countries which were more likely to suffer during the slowdown are ones with weak current account deficits and high inflation rates.
“For those countries we need to be very careful when we consolidate their fiscal situation and ensure that their current accounts are managed properly,” he warned.
While the IMF is ready and willing to support their members in the Africa region with zero interest rate concession loans, Zhu believes that the region should get through the slowdown as huge potential lies within it in many areas.
“I think Africa has huge potential to attract Foreign Direct Investment. There are a lot of areas which have great potential for future growth,” he exclaimed.
In addition, the continent now has access to the international capital market, specifically in government bonds, which will drive growth in the region even further.
“They can now borrow the money to issue bonds for the international capital market, which is a very good new thing as it will strengthen the local financial market,” he added.
Despite this, the region needs to ensure that the new global developments are taken into account so that the necessary reform measures are put in place.
“So far, Africa, particularly Sub-Saharan Africa, is doing very well but like I said we have to balance the new risks that are coming,” he concluded.