AFRICA: Mortgages and mortality

Overheated real estate markets in rich countries and newborns’ fates in poor ones – one phenomenon will inevitably alter the other if the international recession continues, according to the World Bank, which has written that an economic growth collapse in Africa could become a “human collapse”.

Economists define the collapse of economic growth as three or more years of shrinking national income, among other factors.

In studying economic, health and governance data for 45 sub-Saharan African countries from 1975-2005, World Bank senior economist Jorge Arbache found that during multi-year economic collapses, infant deaths increased on average by almost three percent, from 86 deaths per 1,000 live births to 114.

The World Bank calculates that some 28 million children are born in Africa every year, which would mean up to 700,000 more deaths because of the recession, which is caused in part by risky US mortgage lending, said Arbache.

“It is not an obvious link between mortgages and mortality, but the conclusion is undeniable,” he said.

The economist told IRIN people have underestimated the toll the recession will have on Africa’s poorest countries. “Yes, they are relatively more shielded from international markets, but the fact is sub-Saharan Africa is all the more vulnerable because of its dependence on money from overseas. A spike in infant deaths will not be immediate, but increased mortality is inevitable in the current economic climate.”

Arbache told IRIN that 700,000 infant deaths is a high estimate given the international recession is not as severe as independence wars that battered sub-Saharan economies in the past and health care is better.

But even by conservative estimates, “Some 200,000 more babies may die in sub-Saharan Africa this year because of the economic fallout,” the economist said.

“I know these days it seems economists are blaming everything on the recession,” said Arbache. “But there is historical proof that sustained periods of deceleration [economic slump] have a direct impact on governance, small conflicts, life spans and, also, mortality.”

Pay

Arbache said as unemployment climbs in countries where immigrants work to send money home incomes of families in sub-Saharan Africa who live “on the edge of survival” will continue to fall.

In 2008 people living in sub-Saharan Africa received US$20 billion in remittances – half of which went to Nigeria. This was $1 billion more than the previous year, but much less than the 44-percent growth between 2006 and 2007.

Average incomes grew by two percent in sub-Saharan Africa, fuelled by minerals and oil discoveries in resource-rich countries, from 2000-2006 verses its fall by 0.7 percent over the previous decade, according to the World Bank. “But with the recession, we will need to revise our income projections. Commodities markets have started slowing down,” said Arbache.

Trade

Copper-mining in Zambia, oil production in Angola and Equatorial Guinea and an emerging organic cotton s ector have already felt the downturn of reduced demand from high-income countries, based on industry reports and the International Monetary Fund.

There has been intense legislative debate about the portion of the multi-billion-dollar US stimulus bill that would require the use of US-made steel and othersupplies in new bridges and roads. This clause has drawn ire from free-trade advocates who say protectionism will hurt both the United States as well as its trade partners.

Aid

In 2005 Cape Verdean residents received an average of $314 per person in overseas development assistance (ODA), while Republic of Congo’s ODA per capita was $362, according to the Organisation for Economic Co-operation and Development.

Arbache told IRIN: “Aid has propped up certain social developments we have seen [in sub-Saharan Africa] over the last decade. When this money becomes more scarce, these developments are threatened.”

For impact of recession on aid, click here.

“Economic growth collapse [in sub-Saharan Africa] may mean more than a financial downturn – it can be deadly,” Arbache said.

IRIN