Not every country is fortunate enough to have jumped swiftly out of a recession. African economies were slow to feel the effects of the financial crisis, and now, their markets and exchange traded funds (ETFs) may be slow in evincing a rebound.
It is hoped that Africa’s economy will get a strong footing for its economic recovery by next year, write Dan Ran, Liu Ying for China View. African countries are suffering from the swift decline in oil revenue, drop in demand of luxury goods like diamonds and a depressed tourism industry.
The International Monetary Fund (IMF) lowered Africa’s growth projections to 1.7% from 2% for the year. In the African Economic Outlook 2009 issued in May by the African Development Bank, the Organization of Economic Cooperation and Development and the United Nations Economic Commission for Africa (UNECA), Africa’s economy is estimated to expand 2.8% this year, a significant drop from the pre-crisis projections of 5.7%. [Opportunities in the Middle East.]
South Africa, the continent’s largest economy, is likely to fall into its first recession in 17 years, with the World Bank forecasting a 1.5% contraction and a drop of 2.2% by the IMF. [South Africa: return to normalcy in 2010?]
Struggling developed countries may also cut aid to Africa, exacerbating poverty and unemployment problems. Drought and food shortages have also contributed to the slow turnaround of economies.
However, the IMF believes the continent will be better-off next year, estimating a 4% expansion for 2010, and other African governments are reporting similar optimistic views of next year’s growth projections. [What about frontier markets?]
For more on Africa, visit our Africa category.
- iShares MSCI South Africa Index Fund (NYSEArca: EZA): up 48.6% year-to-date
- SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF): up 46.5% year-to-date
- Market Vectors Africa ETF (NYSEArca: AFK): up 32.5% year-to-date
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.