No Longer an Indirect Effect

A recent spate on articles, this blog included has talked of the indirect effects on the African economy of the recent global crisis. Research released today suggests that this effect will be far more direct.

The research carried out by ActionAid suggests that African economies will lose up to $49bn by the end of this year.

About $27bn will come from a fall in aid, export earnings and income from developed yet recession hit countries. The lost income is equivalent to a 10% pay cut for the continent.

The ActionAid report found that countries most exposed will be the ones who have chosen to liberalize their markets and have been an attractive investment proposition for external investors. South Africa, according to the report, will be the hardest hit as it is likely to see its income from abroad plunge to around a fifth of the country’s economic output.

ActionAid is concerned that development will start to go backwards in many countries leading to an increased poverty level and worsening social and economic conditions.

In terms of your development economics answers it could be argued that market liberalization could be a potential barrier to economic development in the current economic crisis.

Original BBC article.