New research commissioned by ONE found that investing $50 billion in a stimulus package for Africa would have real benefits both for Africa, and for the rest of the world, increasing global income by $250 billion over the next ten years. This research reinforces our main message to the G20 leaders ahead of their Summit in London next week — that they must include the poorest in any global solution to the current crisis, both because they will be hardest hit, and also because their economic growth can be part of the long term solution. The main findings of the research were:

• As a result of the global financial crisis, sub-Saharan Africa (SSA) will lose approximately $ 40 – 50 billion in 2008-2009.
• A $50 billion stimulus package for SSA will have positive effects on global trade, and would increase world GDP by 0.1% in 2009-2010. This is equivalent to an increase of $44 billion worldwide, and of this, approximately 15% or $ 6 billion benefits the world outside SSA.
• If the $ 50 billion was used for productive investment in SSA infrastructure, world income will increase by $ 250 billion in 10 years, with much of it in sub-Saharan Africa, and around $20 billion in the rest of the world.
• In 2009 alone, US and Chinese exports would increase by about $1.4 billion; German exports would increase by about $1.9 billion and UK exports by $ 0.7 billion.
• A $50 billion stimulus in SSA will offset more than 85% of the impact of global financial crisis on GDP growth in SSA in 2009 and 2010
• If this stimulus is spent on consumption like income transfers and social safety net programs like cash-for-work or school feeding programs families will feel less stretched by income losses, and incomes could increase by 4% in 2009 and a further 1% in 2010.
• If the stimulus goes to productive investment, in addition to the abovementioned short term effects, there is a long-run positive impact on the level of economic output in SSA, which remains about 1.5% higher. Further, the stimulus on infrastructure could have a further sustained increase in output by an additional 1%.

The research was carried out by Overseas Development Institute (ODI) and the National Institute of Economics and Social Research, ahead of the G20 Summit held in London on 2 April. The research serves as a backbone our policy asks that we’ve put forward to G20 leaders. In the next few days, we’ll be highlighting some of the key issues we’re hoping to see addressed during the G20 Summit in London next week.

-Mikiko Imai, ONE Policy Analyst