Fiscal Policy Lessons in Sub-Saharan Africa from the 2008–09 Global Crisis
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Figure 6.1 Crisis Impact on Sub-Saharan Africa, 2003–10
percentage of GDP growth
8 6.9
7
6.2
6.6
6.9 6.1
6 5
5.1
5.5 4.2
5.1
4.8
4 3 2
2.0
1
10 20
09 20
08 20
07 20
06 20
05 20
04 20
20
03
0
November 2008 estimates actual (2008, 2009) and June 2011 estimates (2010) Sources: World Bank 2009d, 2011. Note: GDP = gross domestic product.
structural, and other policies adopted by developing countries, including many African LICs over the last couple of decades? In this case, we would expect to see it persist in the medium term, despite the shock of the crisis. Or was it mostly temporary because of favorable “bubble” conditions? One piece of evidence: developing countries continued to grow much faster than developed countries in 2009—the expected trough of the crisis—and all major forecasters expect the growth premium to continue over the next few years (Canuto and Giugale 2010). Accordingly, it is possible that African LICs may be able to sustain this growth premium in the years following the 2008–09 crisis, albeit depending on the evolution of the global economy. How did fiscal policy in African LICs respond to the shocks from the 2008–09 global crisis in the immediate 2009–10 postcrisis period? How should they have responded in order to sustain medium-term growth and poverty reduction prospects postcrisis? Many factors enter into the decision making on the fiscal policy response in addition to the disparate initial country conditions. These include the precrisis fiscal and balance of payments positions, the availability and terms of official aid and private capital, the impact of the crisis on vulnerable segments of society, and the ability of governments to adjust fiscal policy expeditiously to effectively respond to the changing external environment (in particular, the ability to