Fragile Countries and the Current Economic Crisis

This paper analyses the channels through which the economic and financial crisis of 2008-2009 is transmitted to fragile countries in Sub-Saharan Africa. Trade stands out as the main direct channel, even though intra-Africa remittances play a relevant role, given that most migrants in Sub-Saharan Africa fragile countries cannot afford the cost of migrating to Europe or to the United States and stay close, remaining in the continent.

The paper also shows that fragile countries are characterised by very low resilience and capacity to cope with shocks. It concludes, by highlighting how Sub-Saharan Africa fragile countries’ policymakers’ room for manoeuver is limited in periods of crisis because of low fiscal space and limited institutional capacity. It advocates that the right response to the crisis would be to mobilise domestic resources, although this will require functional institutions able to offset the potential trade-offs between adverse short-term shocks and a long-term perspective.

Paper prepared for the Conference on "Moving towards the European Report on Development 2009", organised by the European Report on Development in Florence, Italy, 21-23 June, 2009.

European Report on Development 2009

Supported by the European Commission and seven Member States (Finland, France, Germany, Luxembourg, Spain, Sweden and the United Kingdom), the European Report on Development (ERD) is the main output of the "Mobilising European Research for Development Policies" initiative. This flagship report is published since 2009, with the aim of stimulating debate and research on topics of major relevance for development, as well as to enhance the European perspective in the international development arena.