Africa could suffer a permanent economic hit if tensions splinter the global economy into opposing trading blocs around the US and China, the International Monetary Fund said.
“If geopolitical tensions were to escalate, countries could be hit by higher import prices or even lose access to key export markets — about half of the region’s value of international trade could be impacted,” the IMF wrote in an essay posted Monday.
It estimates that sub-Saharan Africa could see a 4% decline in gross domestic product after 10 years under a severe version of this bipolar world.
Matters could be made worse if capital flows are also affected, which would do lasting harm to long-term economic development. The report estimated that foreign direct investment into the region could potentially fall by as much as $10 billion.
“Countries need to build resilience. This can be done by strengthening the ongoing regional trade integration,” the report said. “Deepening domestic financial markets can also broaden sources of financing and lower the volatility associated with relying too much on foreign inflows.”
Source: Bloomberg
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