ADDIS ABABA — African countries can prepare for the impact of the eurozone crisis that threatens to derail economic growth on the continent by improving trade between their countries and fighting inflation, a top World Bank economist said on Sunday.
World Bank’s vice-president for Africa Obiageli Ezekwesili said the traditional partners of Africa in Europe were likely to be affected by the fallout of the European debt crisis, which would squeeze remittances, curb trade and tourism.
Ezekwesili said Africa’s economic growth forecast for this year stood at 5,3% and 5,6% for 2013, but a recession would likely lead to a 1,7% contraction in 2012.
“When you talk about Greece, Portugal, Ireland and the other countries, you then look at African countries particularly linked to them. We keep our eyes on countries like Cape Verde, Guinea, Nigeria, Sierra Leone,” Ezekwesili said on the sidelines of an African Union summit in Addis Ababa.
She said the Ethiopia summit would discuss boosting intra-regional trade in Africa to ease the impact of the recession.
“In Cape Verde, remittances constitute a very important part of its balance of payment, its current account. Its linkage with Portugal has a huge implication for remittances,” she said.
“Tourists receipts (from Europe) can have a serious impact, as will the FDI (foreign direct investment). The export of merchandise to Europe will be affected.”
Remittances — money sent home by workers abroad — are a key source of foreign exchange in Africa after revenue from traditional sources such as tourism, agricultural products and minerals.
Ezekwesili forecast a downturn of at least some 30% in some African countries, which she did not specify, by virtue of trade links with their key European trading partners.
She said some of the countries in Africa sent 60% of their exports to a particular country in Europe and were likely to face a downturn in earnings due to the crisis.
Ezekwesili said public expenditure efficiencies were key and urged diversification of economies and higher farm output.
Europe’s sovereign debt crisis has killed off the economic revival that followed the 2008/2009 global financial crunch and many eurozone economies likely began shrinking in late 2011 and may enter recession this year.
The International Monetary Fund is pessimistic, forecasting a 0,5% contraction in 2012 that it says could drag the world into recession.