Jun 12, 2012
Advanced economies holding back global growthBack
Africa|Environment|Mining|Nedbank Group|Africa|Europe|Brazil|China|France|Germany|Greece|Indonesia|South Africa|United Kingdom|United States|Merchantec CEO Confidence|Nicky Weimar
© Reuse this
Since the financial recession in 2008, global economic growth has been slow, weak and “frustrating”, she said, adding that Europe was expected to enter another recession during the third quarter of 2012.
Speaking at an economic breakfast, in Sandton, on Tuesday, Weimar said staggered growth in the US, Europe and other advanced economies, accounting for 19%, 14% and 18%, respectively, of the world’s production, had stunted consumption of production on the back of debt, uncertainty and lack of confidence.
South Africa’s growth was a function of what occurred internationally and emerging economies, which accounted for 49% of the world’s production, relied on advanced economies as the bulk consumer.
Europe remained a major trading partner for South Africa, with 70% of South African CEOs canvassed in the Merchantec CEO Confidence Index, published on Tuesday, indicating that their business was more affected by economic conditions in Europe than those in China.
While parts of the US economy look stronger, confidence was lagging with State debt at 106.6% to gross domestic product (GDP) remaining high, and the country’s residents refraining from spending in a constrained labour-tight environment.
Many countries still held high and unsustainable government debt. Greece reached a ratio of 135.2% to GDP, other advanced economies recorded a debt of 106.5% and Brazil held 65.1%. South Africa was currently holding a debt ratio of 40%, while China and Indonesia had 22% and 23.2% respectively. Weimar said that no nation should move past 60% of a debt to GDP ratio.
Further, household debt levels, while easing, were still high, particularly in the US and the UK, at 110% and 170%, respectively, of disposable income – a healthy ratio of debt to disposable income was 60%.
Recovering economic growth did not mitigate the debt created by governments to emerge intact out of the recession. Weimar said the strength of recovery was too slow to make a dent in the debt and investor confidence in bouncing back was overestimated.
In Europe, only two countries reached growth levels above their position when recession hit, namely Germany and France, while the remainder of the European countries continued dipping into recession and remained below their growth potential.
Subpar growth was also expected for other advanced economies for many years to come, said Weimar.
South Africa experienced a slow, “patchy” growth, but exports remained far below the level on which it entered the recession. The expected European recession would further strain exports during 2012.
South Africa’s growth slowed to 2.7% in the first quarter, from 3.2% in the final quarter of 2011, hit by a sharp contraction in mining.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Creamer Media Senior Researcher and Deputy Editor Online
Other Video News
Recent Research Reports
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
This Week's Magazine
The BMW Group will invest R6-billion at BMW Group South Africa’s (BMW SA’s) Rosslyn plant to produce the next-generation X3 sports-activity vehicle (SAV) for the local and export markets. Rosslyn will continue production of the current 3 Series through its lifecycle,...
The lack of consequences for poor performance and transgressions on the part of contractors remains a significant hurdle to tackling South Africa’s service delivery challenges, delegates heard at the Consulting Engineers South Africa Infrastructure Indaba, on...
City of Ekurhuleni executive mayor Mondli Gungubele earlier this month officially named the city’s bus rapid transit (BRT) system, Harambee.
About 58% of unstructured data stored by companies is dark data, which means that the value or regulatory importance of the data has not been determined. Subsequently, most of the stored data add costs, rather than increasing revenue or reduce regulatory risks, says...
Effective logistics, import/export and manufacturing consulting services require detailed industry knowledge and experience, but can add significant value to these industries by providing expert advice on various technical elements in their value chains, says...