SUPPORTING AFRICA’S POST-CRISIS GROWTH: THE ROLE OF MACROECONOMIC POLICIES

Abstract

The objective of this paper is to discuss macroeconomic policies that would help African countries, especially the low income countries, reach strong, sustained and shared growth in the post-crisis world. The paper first reviews, with a special focus on LICs, macroeconomic policies in Africa prior to the crisis. It then discusses factors behind ‘the Africa surprise’ that is the continent’s overall good performance during the crisis and relatively fast recovery. It underscores that in the aftermath of the crisis, the emphasis of the macroeconomic policy needs to shift from the objective of very low inflation that predominated prior to the crisis towards growth. Fiscal policy is key in this regard, through public outlays on infrastructure anchored in the medium term expenditure frameworks that would also have a counter-cyclical role. Where conditions allow, frontier market LICs may want to consider adopting flexible inflation targeting frameworks that would provide sufficient room for expansion of credit to the private sector.