Great Recession/Addendum

The World
The financial crisis had an adverse effect upon most of the world's economies. Those worst affected include the high income countries (The United States, Canada, Europe and Japan) with a collective GDP reduction in 2009 of 3.3 per cent. Output reductions between the peak in 2008 and the trough in 2009 were approximately 4 per cent of GDP in the United States, 6 percent in the United Kingdom, 6½ per cent in Italy, 7 per cent in Germany and 8½ per cent in Japan. Next in severity were the downturns of the developing economies (excluding China and India) with a collective GDP reduction of 2.2 per cent The recession had little effect on the South Asian economies, and a comparatively small effect on the East Asian economies. Its impact on the economies of China and India took the form only of significant growth rate reductions.

The advanced G20 countries entered the recession in 2007 with a public debt averaging 78 per cent of  GDP (United Kingdom 44 per cent, United States 62, Germany 63, France 64, Italy 104, Japan 188), which is projected to rise to 118 per cent by 2014 (Germany 89 per cent, France 96, United Kingdom 98, United States 108, Italy 129, Japan 246 )

Economic growth returned to most countries in the course of 2009 at or above pre-recession levels in most developing countries, but below pre-recession rates in many industrialised countries.

The United States
The growth rate of American economy slowed sharply from around 3 per cent in 2006 to 2 per cent in 2007  and the economy continued to operate at below its trend rate of growth until the fourth quarter of 2009. Following the bursting of the house price bubble and the development of the subprime mortgage crisis in 2007, two and a half  million families   faced foreclosure in 2008, and the reductions in personal wealth resulting from the fall in  house prices were causing further reductions in demand. The financial crash of 2008, and the resulting credit crunch, caused  further declines in business activity, which added more pressure on the financial system  and three and a half million Americans lost their jobs in the course of 2008. Credit remained tight in 2009 with lenders  imposing strict standards for all types of loans and unemployment continued to rise throughout the year. By the second quarter of 2011 real gdp per person was 4 percent below its level in the 4th quarter of 2007 and 10 per cent below its 1997-2007 trend line

The Federal Reserve Bank introduced a range of emergency measures, including discount rate reductions and credit easing that resulted in an increase in the monetary base of approximately 140 per cent over its pre-crisis level by the end of 2009 , and the government introduced a fiscal stimulus package that is estimated to total 4.8 per cent of GDP . The Federal budget deficit rose sharply  under the operation of the economy's automatic stabilisers, and by 2010 the public debt had risen from its 2007 level of 62 percent of GDP to over 90 per cent which is projected to rise to 108  percent by 2014. The country's total debt in 2008 was 290 per cent of GDP (made up of government debt 60 per cent, household debt 78 per cent and business debt 152 per cent) . On August 10 2010, after a contentious debate, the Federal Reserve Board decided to maintain its $2.05 trillion stock of mortgage debt and U.S. Treasury holdings, in view of fears of a second downturn.

In December 2010 President Barack Obama agreed a compromise with the Republicans to prolong tax cuts, extend unemployment benefits and cut payroll tax by 2% next year. The US deficit is now projected to increase from 8.5% to 9.5% of GDP in 2011 and from 6.9% to 9.8% in 2012. RETURN TO TOP

Canada
The Canadian mortgage market did not experience the surge in defaults that triggered the subprime mortgage crisis in the United States, and the subsequent financial crash of 2008 had little effect upon the Canadian financial system. Events in the United States nevertheless affected the rest of the Canadian economy. The economic growth rate faltered in the Autumn of 2007 as exports fell in response to falling demand from the United States, and the downturn developed into a sharp contraction, led by falling investment and household spending, in the last quarter of 2008. The government introduced fiscal stimulus measures amounting to 4 per cent of GDP spread over the three years 2008-10, and a modest recovery started in the second half of 2009. By the second quarter of 2011 real gdp per person was 1 percent below its level in the 4th quarter of 2007 and 9 per cent below its 1997-2007 trend line.

Central and Southern America
The Mexican economy suffered from a sharp fall in Mexican workers' remittances from abroad and from the fall in the price of oil. In Brazil, GDP fell by 0.2 percent year-on-year in the first two quarters of the crisis period, but rebounded in the second and third quarter of 2009. In Argentina, GDP increased by 0.5 and 0.2 percent on an annualized basis in the second and third quarters of 2009.

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The United Kingdom
The rapid growth of the British economy in the early years of the 21st century had been partly due to the success of its comparatively large financial sector and to the development of a  comparatively vigorous housing boom, and those factors had a strong influence upon the impact of the recession that followed the collapse of the Lehman Brothers bank in the United States. Even before that collapse, some of its banks had been forced to make large writedowns because of their involvement in the subprime mortgages crisis and there had been a run on one of them, but the banking panic that followed the fall of Lehman Brothers, threatened the continued existence of the financial system. In October 2008 the British Government announced a £500 billion rescue scheme,  including powers to take equity stakes in ailing banks and an undertaking to guarantee interbank loans. An impending collapse of the UK's financial system was averted, but the surviving banks adopted a policy of deleveraging that resulted in a severe credit crunch followed by a general economic downturn. In the second half of 2008 gdp fell by 2.2  per cent  with falls in financial sector output and  in  housing  and commercial investment. By the second quarter of 2011 real gdp per person was 6 percent below its level in the 4th quarter of 2007 and 13 per cent below its 1997-2007 trend line.

The Bank of England introduced a range of emergency measures including  discount rate reductions and quantitative easing that resulted in an increase in the monetary base of approximately 230 per cent over its pre-crisis level by the end of 2009 A fiscal stimulus  amounting to 1.5 per cent of GDP was introduced by  the November Pre-Budget Report, including a temporary 2.5 percentage point reduction in value-added tax and a bringing forward of £3 billion of capital investment.

In 2008, the country's total debt was 469 per cent of GDP (made up of government debt 52 per cent, household debt 114 per cent and business debt 303 per cent). The possibility of household deleveraging was considered in 2010 to present a danger of hampering recovery from the recession.

The United Kingdom entered the recession in 2007 with a public debt of 44 per cent of its GDP, which had risen to 62  per cent by 2010, about 30 per cent of which was held by overseas investors. In February 2010 its Parliament passed the Fiscal Responsibility Act which imposed a duty on the Treasury to ensure that by the financial year ending 2014 public sector net borrowing as a percentage of GDP is at least halved from its level for the financial year ending 2010, and the budget of June 2010 introduced proposals that were expected to achieve that halving two years sooner.

A member of the Bank of England's Monetary Policy Committee has spoken of a "real danger" of a second downturn in 2011. On 23 March 2011, the Moody's credit rating agency warned that "Slower growth combined with weaker-than-expected fiscal consolidation could cause the UK’s debt metrics to deteriorate to a point that would be inconsistent with an AAA rating."

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The Eurozone
The recession had widely differing impacts upon the economies of members of the European Union's monetary union but all were subject to the monetary policy of the European Central Bank. The bank responded to the recession by reducing its discount rate in stages to a minimum of 1 per cent, and adopting a limited amount of quantitative easing, a policy that resulted in an increase in the monetary base of approximately 50 per cent over its pre-crisis level by the end of 2009. The European Union's output loss between the second quarter of 2008 and the end of 2009 is estimated to have reached 5% of GDP by the end of 2009. Among the larger Eurozone countries, the 2009 contraction ranged from about 2% in France to 4½-5% in Germany, and Italy. However, business confidence began to improve during the second quarter of 2009 and a hesitant recovery in output began in the third quarter.

The Euro crisis

 * (Additional information is available in the article on the eurozone crisis)

With the return of economic growth, attention turned to fiscal policy. The EU's growth and stability pact required member governments to limit their budget deficits to  3 per cent of GDP and  their public debt to 60 per cent of GDP, but there had been numerous breaches.

Few member governments were in compliance with those limits by the end of 2009. Twelve Member States had public debt ratios higher than 60% of GDP in 2009, including  France (77.6%) and Germany.(60.9%). Particular concern developed in early 2010 concerning the fiscal sustainability of the economies of the "PIIGS" countries (Portugal, Ireland, Italy, Greece and Spain) following rating downgrades by the credit rating agencies.

In May 2010, a €500 billion European financial stabilisation mechanism was established, enabling  member states in difficulties  to get loans from the European Central Bank (subject to the adoption of measures to restore  fiscal sustainability) and the Bank launched a securities market programme, designed to calm the bond market. The June report of an IMF mission on Eurozone policy attributed the crisis to deficient governance of the euro area, and called for immediate further action. By September 2010 it had become clear that confidence had not been restored. Ireland's 10-year sovereign spreads against Germany had risen to a record 357 basis points, compared with 145bp at the start of the year; Spain’s 10-year bonds were trading  at 192bp above Germany's, compared with 57bp at the start of the year, and  Portugese goverment bonds were trading at 333bp, compared with 67bp. .

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Germany
The international banking panic had an immediate impact on Germany's fragmented banking system and in October 2008 the government set up a fund to guarantee the  banks' debts and provide for  recapitalisation and  asset purchases. Although there had been falls in national output earlier in the year, the government did not at first consider further action  to be necessary, but by the end of the year a fall in exports signalled the onset of major downturn. By the second quarter of 2011 real gdp per person was 2 percent above its level in the 4th quarter of 2007 but 3 per cent below its 1997-2007 trend line.

The government introduced a fiscal stimulus package that is estimated to total 3.4 per cent of GDP that included reductions in income, and payroll taxes(starting in July) as well as industrial subsidies and infrastructure investments. Those discretionary actions together with the action of the automatic stabilisers were expected to increase the budget deficit to 7% of GDP and raise the national debt from its 2007 level of 65 per cent of GDP to over 80 per cent by  2010. The recovery in the second half of 2009 has been attributed by the OECD to the fiscal stimulus, expansionary monetary conditions, an upswing in world trade and restocking activities of companies but in view of the substantial output gap that remained at the end of 2009 they estimate that the pre-crisis level of production will not be reached until 2013.

Germany entered the recession in 2007 with a national debt of 63 per cent of its GDP which is projected to rise to 101 percent by 2014. In 2008, the country's total debt was 274 per cent of GDP (made up of government debt 69 per cent, household debt 66 per cent and business debt 138 per cent)

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France
The French economy suffered less from the recession than those of most of the other G7 countries. French banks were affected less than their counterparts in many other countries, primarily because they had diversified their activities and adopted more ,defensive prudential lending standards, and household indebtedness  remained lower than in other countries. The measures taken by the government in October 2008 to boost the liquidity and solvency of the big banks were successsful in maintainng the functioning of the credit market . By the second quarter of 2011 real gdp per person was 2 percent below its level in the 4th quarter of 2007 and 8 per cent below its 1997-2007 trend line.

The government introduced a fiscal stimulus package that is estimated to total 1.3 per cent of GDP including infrastructure spending, measures to relieve cash-flow difficulties for small and medium-sized enterprises, tax holidays  for low-income households, increased unemployment compensation, and loans to the car and aircraft industries.

France entered the recession in 2007 with a national debt of 64 per cent of its GDP which is projected to rise to 96 percent by 2014. In 2008, the country's total debt was 308 per cent of GDP (made up of government debt 73 per cent, household debt 110 per cent and business debt 125 per cent)

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Italy
Italian banks were less exposed to high-risk products than those of other large countries because of their conservative behaviour and their regulators' and supervisory caution, and there were no bank closures or rescues. . The economy nevertheless suffered a relatively severe recession. By the second quarter of 2011 real gdp per person was 6 percent below its level in the 4th quarter of 2007 and 9 per cent below its 1997-2007 trend line.

Italy entered the recession in 2007 with a national debt of 104 per cent of its GDP which is projected to rise to 129 percent by 2014. In 2008, the country's total debt was 298 per cent of GDP (made up of government debt 117 per cent, household debt 81 per cent and business debt 303 per cent)

A spread of Italian government bonds over German government bonds developed in the course of 2010 and rose to over 3½ per cent by August 2011.

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Iceland
Before the Lehman Brothers collapse in September 2008, Iceland had a thriving economy, its government had a budgetary surplus, its banks had no toxic assets and its consumers had not indulged in any speculative bubbles. (Although Willem Buiter and Anne SIbert, believed that  its banking model was not viable). A few months later its banking system had collapsed, its government was deeply in debt, its currency had suffered a 65 per cent depreciation, real earnings had fallen by 18 per cent, and its economy was facing a deep and prolonged recession. Those were the consequences of the impact of the international credit crunch on a banking system that had overseas debts amounting to almost ten times the country's GDP. Unable to roll over their debts, three of its largest banks had to be rescued by the government, and the consequent rise in national debt caused a flight from the national currency that made matters worse. In October 2009 an OECD economist reported that Iceland's economy was in the midst of a deep recession; the exchange rate had plunged; capital flows had  been frozen; inflation was up; public debt had risen; social needs had increased; and that the unemployment insurance fund was been nearly depleted. In November 2009 the Moodys credit rating agency downgraded Iceland's government bonds to its lowest investment grade. The government had introduced fiscal stimulus measures amounting to 9.4 per cent of GDP spread over the two years 2009-10, a loan was obtained from the International Monetary Fund and recovery was expected during 2011.

In a June 2010 press release, the IMF effectively approved the Government's fiscal policy with the statement that "the planned 3 percent of GDP fiscal adjustment can deliver a primary surplus and a reduction in Iceland’s public debt, provided budget implementation stays on track in 2010".

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Ireland
A downturn in the output of the formerly booming Irish construction industry that started in 2007, intensified and developed into a full-blown  economic recession in the course of 2008 and  construction and property companies  began to default on loans from the banks. News of their defaults made foreign banks and investors, that had been the banks' principal source of short-term finance, reluctant to risk further commitments, and a banking crisis developed. Consumer confidence fell and there was a very sharp increase in unemployment. In an attempt to restore confidence, the Irish government undertook to guarantee loans to the banks. GDP growth rates averaging about 6 percent over the period 1995-2007 were followed by year-on-year falls of 8 percent in the 4th quarter of 2008 and 9 per cent in the first quarter of 2009, and the inflation rate fell to -3 per cent in September 2009. The government introduced fiscal stimulus measures amounting to 4.4 per cent of GDP spread over the three years 2008-10 which, combined with the effects of its automatic stabilisers is expected to raise the national debt to over 80 per cent of GDP from its 2007 level of 28 per cent. Foreign investors became wary of the possibility  a sovereign default, and the government's ability to finance the deficit was threatened by a general loss of confidence. In March 2009 the Standard and Poor credit rating agency downgraded its rating for Ireland from AAA to AA+, and April, the government decided that the only way to restore confidence was to take steps to reduce its deficit - and took the extraordinary step of increasing taxation in the midst of a recession. Additional steps taken included direct purchase of stock in some banks and the establishment of the "National Asset Management Agency" - essentially a government-owned bank that will buy toxic debt from six financial institutions - both steps aimed at improving their balance sheets and freeing up capital. .

The report of an IMF consultation published in July 2010 concluded that the governments "aggressive measures" had helped gain policy credibility and stabilize the economy but that further long-haul efforts with active risk management would be need to preserve policy credibility. On August 24, 2010 the Standard and Poor's credit rating agency downgraded Ireland's debt for the 3rd time to AA- (following 3 downgrades by the Fitch agency and 2 by Moody's).

Ireland's economy suffered a second downturn in the second quarter of 2010 and the Government's financial position continued to deteriorate. In September 2010, its CDS spread reached a record 5 per cent. On the 22nd of November 2010 the government applied for financial assistance from the EU and the IMF and on the 28th of Nonember, the Government announced the terms of the loan.

The National Recovery Plan of December 2010 aimed to consolidate public finances by 3.8% of GDP in 2011. Income tax bands werw to fall by 10%, and there were to be reductions in both current and capital expenditure.

The spread of Irish government bonds over German bonds had reached 8 percent by August 2011. RETURN TO TOP

Russia
A fall in theoil price combined with the collapse in world trade and a withrawal of international credit had a devastating effect upon the Russian economy in the first half of 2009, and its GDP fell by about 10 percent . That prompted the central bank to inject large amounts of liquidity into the banking sector and to permit a gradual depreciation of the rouble by about 25 per cent against the dollar-euro basket. The Government launched a major fiscal stimulus in April 2009, consisting mainly of social transfer payments. The budget balance changed from a surplus of 4¼ per cent of GDP in 2008 to a deficit of 6¼ per cent in 2009 which the Government monetised from reserves, leaving its public debt at the internationally low level of 11 per cent of GDP .

Russia's recession ended in the first quarter of 2010 with a GDP growth at a yearly rate od 3.3 per cent, followed in the second quarter by growth at a yearly rate of 5.2 per cent. Taking account of earlier declines, this left economic activity at well below pre-crisis levels.

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The Baltic States
The fastest-growing economies in  the European Union in 2006 became its three fastest-contracting economies in 2009. Years of boom were followed by falls in GDP averaging  about 1½ per cent in 2008 and  about 16 per cent in 2009. An International Monetary Fund report on Estonia noted that investment already started to slow in mid-2007, along with a bursting of the property bubble, when the two main banks tightened lending conditions. The collapse of global external financing and foreign trade in the Lehman Brothers bankruptcy aftermath exacerbated the downturn. Deflation and wage declines were projected to persist through 2010 , but growth rates are expected to average between 2 and 5 per cent over the period 2010-14 .

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Greece
When Greece joined the Eurozone in 2001, it was less prosperous than the other members, but its GDP grew more rapidly over the next seven years and fell less rapidly in the course of 2009. By the end of 2009, its unemployment rate had nevertheless risen in line with the European average and it was still suffering higher levels of poverty , and its national debt had risen by about 25 per cent above its pre-crisis level of 100 per cent of GDP. Concern about the sustainability of the goverment's fiscal policy had led the  credit rating agencies to downgrade the government's debt in January 2010,, and several times after that; and by early 2010 the cost of insuring against default by the Greek government rose  after  Moody’s Investors Service said the country’s economy  was facing a “slow death” from deteriorating finances. (It has been suggested that the country's deceptive conduct and its default record were contributory factors.) The investor panic continued until, in April 2010, it was announced that members of the Eurozone were prepared  to offer the government a conditional of €30 billion at lower interest rates than the current market rate (then over 7 per cent) . In return, the Government was required to carry out a programme of fiscal contraction that was expected to drive its economy into a deep recession. The statement did not have the expected stabilising effect, but was followed by increases in risk premiums and further credit rating downgrades with Standard and Poor estimating that investors would recover only 30 to 50 per cent of their investments if the Greek government defaults. A further agreement on May 2 to lend the Greek government €110 billion also failed to reassure investors. Public spending cut-backs have sparked widespread demonstrations. An August 2010 review applauded the government's measures, but investors continued to be unwilling to buy its bonds. Fiscal tightening in 2010 is expected to amount to 7.5 per cent of GDP.

The economy remained in recession throughout 2010, and the CDS spread on government bonds widened to over 8 per cent in September. On March 7 2011, Moody's downgraded Greece's government bond ratings to B1 from Ba1, and assigned a negative outlook to the rating.

The spread of Greek government bonds over German bonds had reached 12 percent by August 2011.

Spain
The recession in Spain was shallower but more protracted than the European average, and the recovery, which started in the first quarter of 2010, has been described as "weak and fragile". Spain's unemployment rate was among the highest in Europe, reaching 19 per cent in March 2010. A major contributory factor was the bursting of a vigorous housing bubble, as a result of which  the construction sector crashed, and the banking sector suffered a downturn despite the fact that it  had avoided the acquisition of toxic debt. Another major factor was deleveraging of a deeply indebted household sector. The Government responded with a major fiscal stimulus that, together with the effects of the country's automatic stabilisers resulted in the largest budget deficit in the European Union - although its public debt as a percentage of GDP was among the smallest. In 2010, the bond market developed a debt aversion against Spain following the Greek crisis, the Standard and Poor credit rating agency downgraded its credit rating from AA+ to AA on 28 April 2010. A spread of Spanish government bonds over German government bonds developed in the course of 2010 and had risen to over 3½ per cent by mid-2011.

The spread of Spanish government bonds over German bonds had reached 3½ percent by August 2011.

Portugal
The Portugese economy has long depended upon agricultural exports, tourism, and income from its nationals working abroad - all three of which were hit by the recession. It went into downturn earlier than the European average and emerged no sooner. The Government responded with a fiscal stimulus equivalent to about 1¼ per cent of GDP. According to its statistics institute, the Portugese economy grew by 0.3 per cent in the second quarter of 2009 after contracting in the previous three quarters, leaving at 3.7 per cent lower than a year previously. The ensuing growth rate has been low and the unemployment rate has remained above 10 per cent. Portugal's public debt reached 77 per cent of GDP in 2009 and was expected to expand further in 2010. . Deficit-reducing measures were put in hand and were met with strong trade union resistance. Unease following downgrades of Greek government bonds caused increasing debt aversion towards Portugal, and Standard and Poor downgraded its credit rating from A+ to A- (4 grades below the top) on 27th April 2010. On 12th January 2011 a €599m  issue of  bonds   maturing  in 2020 at a yield of 6.716 per cent was oversubscribed, but 6th April the Prime Minister announced that he had applied fr financial assistance from the European Union.

The spread of Portugese government bonds over German governmeny bonds had reached 8 percent by August 2011. RETURN TO TOP

Japan
Japan has suffered a much deeper recession than the other large industrialised economies mainly because of its greater reliance upon exports of cars and high-technology products. Output was also restricted by a credit crunch and by the need to reduce high inventory levels. By the second quarter of 2011 real gdp per person was 5 percent below its level in the 4th quarter of 2007 and 8 per cent below its 1997-2007 trend line. The government introduced fiscal stimulus measures amounting to 2 per cent of GDP. Combined with the effect of the country's automatic stabilisers, its national debt (the majority of which was held by domestic investors) is expected to rise to over 200 per cent of GDP from its already massive pre-crisis level of 167 per cent.

Japan entered the recession in 2007 with a national debt of 188 per cent of its GDP which is projected to rise to 246 percent by 2014. About 95 per cent of the national debt is held by domestic investors. In 2008, the country's total debt was 459 per cent of GDP (made up of government debt 188 per cent, household debt 96 per cent and business debt 175 per cent)

On 27 January 2011, Standard and Poor's downgraded Japan's long-term sovereign credit ratings to 'AA-' from 'AA'.long-term sovereign credit ratings to 'AA-' from 'AA

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China
In November 2008, the Chinese Government announced a major fiscal stimulus (amounting to 4.4 per cent of GDP)  and the adoption of a highly expansionary monetary policy, which  partially  offset  the effect of the collapse in world trade upon China's export sales, and limited the resulting fall in output growth. Export growth resumed in the course of 2009 - rising to above pre-crisis levels in 2010. Output growth began to pick up in the second quarter of 2009 and continued into 2010, supported by an expansionary fiscal stance, and there were signs of a developing property boom. By the second quarter of 2011 real gdp per person was 35 percent above its level in the 4th quarter of 2007.

India
A reversal of India's capital inflows started in January 2008 through a massive disinvestment by foreign institutional investors (a  net  disinvestment of $13.3 billion from January 2008 to February 2009 following  a net investment of $17.7 billion during 2007). That was followed by a massive slowdown in external commercial borrowing by India’s companies, trade credit and banking inflows from April 2008 . There was a progressive reduction in manufacturing output in the course of 2009 following a fall in overseas demand for India's exports. Output growth resumed in March 2009, was back on trend by June and is expected to continue at its long-term trend rate through 2010 and beyond. Capital inflows have resumed and are rising but inflation is also rising and IMF economists consider India's fiscal position to be one of the weakest among major emerging markets.

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Australia
The government introduced fiscal stimulus measures amounting to 4.6 per cent of GDP spread over the three years 2008-10. In the course of 2009 there was a revival in exports to emerging markets, growth  in consumer demand and a recovery in housing and mortgage markets, and in October the central bank raised its discount rate to 3.25%

South Africa
The South African economy was growing strongly in 2006 but, in response to the inflationary threat from growing food prices, the Government then adopted a programme of monetary restraint. Economic growth was already slowing when the economy was hit by the financial crisis of late 2008. There was a sudden outflow of international funds, exports fell in response to the falls in international trade and in commodity prices, and the economy went into recession. Output fell by 1.8 percent in the fourth quarter of 2008 and by a further 6.4 percent in the first quarter of 2009. Manufacturing and mining output contracted dramatically, and the unemployment rate rose to 23 per cent.

Other developing countries
The other sub-Sahara African countries were largely unaffected by the recession with the economies of all except Eritrea estimated to have grown by more than 4 per cent between 2009 and 2010. Most of the developing countries experienced a slowdown in economic growth, however. The worst affected were in Latin America and the Caribbean, and in Europe and Central Asia; and none of the other developing countries  suffered an actual fall in output. There was weak recovery of output in the course of 2009, but there were still output gaps of around 3 per cent of GDP at the end of 2009, suggesting that high levels of unemployment might continue. perhaps for years. Experience varied among the developing countries, however. Economists at the International Monetary Fund found that the worst affected of the developing countries had been those with highly leveraged domestic financial systems and rapid credit growth. Countries exporting more advanced manufacturing goods had suffered more than  those exporting food,  and  countries with pegged exchange rates had  fared less well than those with flexible exchange rates.

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