INTERVIEW-Food, fuel prices may crimp sub-Saharan Africa growth

Thu May 12, 2011 11:45am GMT
 

* World Bank says turnaround from economic crisis dramatic

* Says oil-, food-importing countries under strain

* FDI flows to rise 66 pct to $53 bln in 2011

By Fumbuka Ng'wanakilala

DAR ES SALAAM, May 12 (Reuters) - Sub-Saharan Africa's economy is likely to grow by 5.1 percent this year and 5.4 percent in 2012, but high food and fuel prices could slow its rapid recovery from the global financial crisis, the World Bank said on Thursday.

The Bank's earlier forecast showed the region growing by 5.3 percent this year and 5.5 percent in 2012. The region's economy grew 4.7 percent in 2010, rebounding from a 1.7 percent growth a year before, when the world economic crisis hit output.

"Having presented a fairly optimistic picture, I should add that there are some real risks to this growth forecast. Perhaps most importantly is this increase in food and fuel prices that we are seeing right now," Shantayanan Devarajan, World Bank chief economist for Africa, told Reuters in an interview.

"If food prices and particularly fuel prices continue to rise, there is some really serious risk to the growth forecast."

The world economic slowdown hit Africa hard as demand for agricultural commodities like tea, coffee and cocoa slowed and tourists travelling to the continent from Europe and North America postponed holidays and foreign direct investment dried up.

Much of Africa has rebounded from the global crisis and is enjoying healthy growth thanks to prudent macroeconomic principles and a surge in investments, Devarajan said in the Tanzanian commercial capital.

"I think they've bounced back very rapidly after the crisis. In fact this is the fastest turnaround that Africa has ever experienced," he said.

Devarajan said the economies of many net food-and oil-importing African countries could be hardest hit by higher prices.

"This could have serious consequences for inflation and current account deficits particularly for the oil and food importers, but also could have very serious and devastating consequences for the poor, many of whom spend 50 to 70 percent of their income on food," he said.

Devarajan said a bumper crop in some African countries had helped to cushion their economies from the effects of the rising food prices at the world market.

He said sub-Saharan Africa should also see higher foreign capital flows this year -- after rising 6 percent to $32 billion in 2010 -- as perceptions about the continent improve.

"Foreign Direct Investment also rebounded after the global crisis ... and we are expecting it to be a record $53 billion this year," he said. (Editing by George Obulutsa, Ron Askew)

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