By John Humphrey
Many developing countries have continued to grow strongly in the past five years, while the US suffered recession and Europe stagnates in the face of deep-seated problems and policy failures, growth rates and many developing countries, including many countries in Africa, have held up much better. In spite of the many dire predictions made in 2008 about the impact of global recession on sub-Saharan Africa, Africa as a whole has continued to grow at historically quite high rates.
This resilience in the face of recession is quite new. Back in the 1990s, a number of developing countries were subject to repeated economic shocks. At the first sight of global turbulence, their economies were hit. Brazil is a good example. In the late 1990s, their economy had a rollercoaster ride. Short-term interest rates doubled in November 1997 following the East Asian crisis. They settle down again at the beginning of 1998, but they almost doubled again during the Russian crisis in May. However, in contrast, the past five years have seen a very different picture. Growth has continued and interest rates have been relatively steady moving upwards and downwards in a largely orderly fashion. Brazil has had a "good" global recession.
Is this all about to change? A recent article on China is but the latest to ask if China is about to experience a hard landing. The problem is not just that demand for Chinese-exported goods in Europe and North America is stagnating. The slowing down of the economy is likely to reveal the consequences of speculative excesses, just as they have in Europe. But also, as the slowdown bites, the consequences of the asset-price bubbles of recent years, particularly in property, will become apparent. Banks will find that they have more bad loans than they had previously cared to admit. Governments will find that they are left with 'white elephants' – perhaps China and Spain can compare notes on regional airports or empty property developments.
How much will this affect economic growth in Africa? The booming trade between China and Africa and the China-driven surge in commodity prices have been factors in African growth, even though this growth reaches far beyond the commodity exporting countries in the region. But the stagnation in Africa's export markets to the North and to the East would be a major challenge to the resilience of African economies.