9 Financial Crises and African Trade Nicolas Berman and Philippe Martin
Early in the 2008–09 global financial crisis, a common view was that Africa’s low level of financial integration may be a blessing in disguise, insulating the region from the direct impact of the crisis. Indeed, the direct wealth effect may have been less important in Africa than in other regions such as East Asia, Latin America, and Central and Eastern Europe, where countries have more-open financial flows than African countries. African banks may indeed have bought fewer “toxic” assets than did banks in other parts of the world, but this reduced exposure was not enough to mitigate the negative effects of the crisis in this region. African countries, although not involved in the origin of the crisis, have been hard-hit by its expansion. The potential explanations are many: • Fluctuations in commodity prices may have particularly affected African countries; global slowdown of demand had no reason to spare African products. • Because the crisis deeply affected migrants in developed countries, workers’ remittances may have plummeted, diminishing an important source of revenue for most African countries. • The same effect holds for aid flows, which developed countries have reduced during past downturns. However, the main entry gate of the crisis into Africa has been international trade. U.S. trade statistics for 2008–09 provide one indication of how vulnerable African countries are on the trade side. Following the crisis, U.S. imports from Sub-Saharan African countries have fallen more dramatically than U.S.
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