1 This broad based deterioration in the global economy was carried through into the first and second quarters of 2009. The most recent projections by the IMF suggest that global growth will contract by 1.4% in 2009 before recovering to a growth rate of 2.5% in 2010. For the United States of America and the Euro Area, growth in 2009 is projected to contract by 2.6% and 4.8%, respectively; whilst in Japan and the United Kingdom, growth is projected to contract by 6.0% and 4.2%, respectively. Although emerging and developing economies are projected to perform much better, with a projected growth rate of 1.5%, this rate of growth is significantly below the estimate of 6.0% growth in 2008. Further, growth in Sub-Saharan Africa is projected to decelerate sharply to 1.5% from 5.5% in 2008. Thankfully, as we meet today there is growing evidence that in many parts of the world, the worst of the crisis may be over. At the epicenter of the crisis, i.e. the United States of America (USA) and Europe, the collapse in output has decelerated – with the most recent evidence pointing to some increase in growth both in terms of actual output as well as some of the leading indicators of output. In the USA, second quarter GDP growth figures of -1% indicate a deceleration in the pace of contraction. Further, in the second quarter of 2009, important Euro areas economies such as Germany and France actually posted positive rate of GDP growth.
Economists understood the broad problem, but somehow failed to draw or contemplate the correct conclusions, despite our knowledge of previous episodes of financial collapse. However, the charge against the economics profession also has merit in that ultimately these global imbalances gave rise to or produced perverse economic incentives in financial markets which existing models did not or could not contemplate. This was compounded by a lack of regulatory oversight of key sectors of the financial market. But let me return now to the question of Africa and the global financial and economic crisis. How does Africa respond to the real prospect of lower growth than is necessary to reduce poverty on a sustainable basis? I believe that Africa needs to retain open economies, expand regional markets and integration; and expand the reach and benefits of the market economy. Zambia has been an active and founder member of the Southern African Development Community (SADC) as well as the Common Market for Eastern and Southern Africa (COMESA). Through these bodies Zambia is looking to leverage its own potential through projects such as the North-South Corridor under COMESA, which seeks to open up efficient transport routes for the flow of goods, service, and people, from the south to the north of Africa. Further, under SADC Zambia is looking to develop its vast hydro-electric power potential, estimated at around 6,000MW, as well as transmission infrastructure to enable Zambia to supply countries in the East African Community which face severe power deficits.