World economic growth in 2009 is expected to decline to its slowest rate since the Great Depression. In the case of Sub-Saharan Africa, the latest IMF’s World Economic Outlook projects the region to grow by 3.25% this year, down from 5.4% in 2008. Many economists are now expecting the crisis to hit Africa harder and longer than was previously projected. Not only will the crisis impact human development and economic indicators, but Africa’s governance and conflicts may be affected as well. Although the channels through which economic collapses affect governance and conflicts are often country-specific, institutions in poor countries tend to be so strained that ethnic tensions and confrontational politics can get worse when competition for scarce resources increases.
Empirical evidence on growth accelerations and collapses in Africa between 1975 and 2005 suggests that governance and conflict indicators are substantially affected by growth volatility. Table 1 presents differences between sample averages during growth accelerations and collapses for key governance and conflict indicators. The World Bank’s Country Policy and Institutional Assessment (CPIA) score, a broad measure of policy and institutional performance, is lower during decelerations. Correlation coefficients (not reported) between the probability of growth acceleration and deceleration and CPIA indicator confirm that countries that experience more economic collapses have lower CPIA scores.
Governance indicators–political stability, government effectiveness, rule of law, and control of corruption–are lower for growth decelerations. PT Rule of law and control of corruption indicators, for example, decreased during economic collapses to -1.11 from -0.64, which is a substantial change. Correlation coefficients between the probability of growth acceleration and deceleration and governance indicators are negative, suggesting that growth decelerations are accompanied by deterioration of governance indicators.
Minor conflicts are more frequent during growth deceleration episodes than during normal times, whereas major conflicts are less frequent during growth acceleration and deceleration episodes than during normal times. The correlation coefficients suggest that economic collapses are associated with minor conflicts, and that major conflicts hamper chances of growth acceleration.
Given the severity of the current crisis, it may have unprecedented regional governance and political consequences, and may eventually fuel governance reform reversals. Because poor governance and conflicts are likely to hold back growth recovery and vulnerable groups are exposed the most to them, these issues cannot be overlooked by any agenda seeking to protect Africa from the adverse impacts of the economic crisis.