The Impacts of the Global Recession of 2008-2009

Topics: Africa, African Union, Zimbabwe Pages: 10 (3828 words) Published: March 25, 2013
The world recession of 2008 to 2009 was caused ultimately by global imbalances in trade and capital flows, globalization of financial markets, the trend towards a new finance-led capitalism and the related pattern of income distribution. The effects of the recession on Africa were tremendous and are still being felt today. Africa is homeland to numerous natural resources. Contrary to this, it is one of poorest regions in the world constituting almost 10% of the world’s population and ravaged by high crime rates and the HIV and AIDS pandemic. The worldwide economic crisis of late 2008 and 2009 made significant economic and social developmental challenges for African countries. Even if the impact of the economic crisis on Africa was expected initially to be less severe, its challenges have now been estimated to be profound. The profit Africa gained from the exports and imports of natural resources and commodities has reduced substantially. Trade with China and the United States of America became significantly feeble. Interestingly, the outcome of the recession seems to vary from country to country. However, there have been common economic impacts seen from those countries which participate in large scale exportation. Therefore, this essay serves the main purpose of identifying the impacts made by the recession on Africa. These aspects include, impacts made on the tourism, agriculture, hospitality, banking, health, oil and mining sectors. In addition, it identifies the effects on the economy namely, global trade, foreign direct investment, remittances, foreign aid flow and over above this, the exacerbation of poverty as well the positive impacts and changes the recession brought. To make a start with this subject, the consequences of the global economic crisis have been manifold. The crisis has brought a profound economic decline in the economies of African countries and the growth rates have dropped. Furthermore, the impacts brought about by the recession hit all major economic goals, causing a down turn in the natural resources sector and recent development strategies. International trade has played a pivotal role in the economic growth of African countries, with the demand of African commodities increasingly growing in the global market. When the recession had worsened, the most immediate effect was a decline in the exporting and demand of African commodities. In 2009, global trade experienced the sharpest drop in seventy years especially trade in iron, steel and manufacturers and industrial machinery were affected severely. 60 percent of African exports go to the European Union as well as the United States. [1] Thus, considering the fact that America and European countries were adversely affected by the financial crisis, where imports fell by 2 and 5 percent respectively and a substantial fall in the prices of commodities such as copper and oil, African countries were the most vulnerable. As a result, there has been a major decrease in the economic growth rates and account balances. This is saddening, considering the fact that many countries depend on the exporting revenue of natural resources such as oil and minerals. By way of example, mineral exporting countries such as Zimbabwe, Zambia and the Democratic Republic of Congo dropped approximately 6 billion US dollars in 2009. Furthermore, countries such as Nigeria and Angola saw a deficit of about 79 million dollars and Uganda, the second largest coffee producer and exporter in Africa, experienced a shortfall from 36.3 million to 23.9 million. Moreover, South Africa’s total exports decreased significantly in 2009. The most affected product being wine which experienced a large drop in total volumes. Pursuing this point further, the decline in the price of African commodities led to a major loss in trade and trade tax revenue. For instance, crude oil which plays a vital role in making products such as paint, diesel fuel, heating oil and make up has been reported to be...
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