http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.02Change: -0.02
R/$ = 10.68Change: -0.06
Au 1286.35 $/ozChange: -1.15
Pt 1424.00 $/ozChange: -2.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Jul 24, 2012

Bank warns of more risks as it cuts 2012 SA growth outlook to 2.5%

Back
World Bank lead economist for South Africa Sandeep Mahajan on the bank's downward revision of the country's growth outlook. Camera Work: Nicholas Boyd. Editing: Darlene Creamer. Recorded: 24.7.2012.
Africa|Eskom|Industrial|South Africa Sandeep Mahajan|Africa|Europe|Brazil|China|India|South Africa|Bank|Energy|Gross Domestic Product|Industrial Products|Products|Gill Marcus|Power|Pravin Gordhan|Simulation
Africa|Eskom|Industrial||Africa|||Energy|Products|Power||
africa-company|eskom|industrial|south-africa-sandeep-mahajan|africa|europe|brazil|china|india|south-africa|bank|energy|gross-domestic-product|industrial-products|products|gill-marcus|power|pravin-gordhan|simulation
© Reuse this



The World Bank has lowered its gross domestic product (GDP) growth outlook for South Africa from 3.1% in November to 2.5% and has warned that the performance of Africa’s largest economy could be weaker still if the eurozone crisis deepened further.

The bank’s lead economist for South Africa Sandeep Mahajan said the 2.5% ‘base case’ – which is also below the 2.7% forecast by Finance Minister Pravin Gordhan in February – was premised on world GDP growth of 2.5% during 2012, a 0.3% contraction in the eurozone and lower growth in the key emerging markets of China, India and Brazil.

Earlier, Gordhan indicated that growth was likely to fall short of the 2.7% forecast of February, after the South African Reserve Bank, which cut interest rates on July 19, trimmed its growth forecast to 2.7%, from 2.9 percent.

Governor Gill Marcus warned that risks to the country’s GDP projection were to the downside, particularly if the economic stagnation in the eurozone intensified.

South Africa, the World Bank warned, was vulnerable to both the slowing economies of Europe, which consumed many of its industrial products, as well as to a slowdown in the rate of expansion in China, which consumed many of its commodities.

The country was particularly sensitive to changes in the eurozone's outlook, with Mahajan indicating that for every one percentage point change in the territory’s GDP South Africa’s GDP adjusted by 0.8 of a percentage point.

The strong correlation meant that the downside risks to South Africa associated with a decline in the eurozone beyond that which was currently being projected were material.

To illustrate this vulnerability, bank had developed two downside-risk scenarios: the first assumes a severe credit squeeze in one of two eurozone members, with limited contagion; while the second was premised on a “disorderly resolution to the crisis”.

The model shows that, under the first scenario a further 1.5% percentage points would be shaved off South Africa’s already fragile growth. Under the second, the simulation indicated that 2.2 percentage points could be lopped off the country’s growth outlook.

However, the downside risks were not limited to the resolution of the economic crisis in Europe. Mahajan warned that lower commodity prices, precipitated by any further cooling of the Chinese economy, represented a major potential threat.

The bank showed that a 20% fall in nonoil commodity prices would shave 1.7 percentage points off South Africa’s growth rate. Under the model “South Africa is among the ten countries to be hit most by the drop in commodity prices”, the bank’s biannual ‘South Africa Economic Update’ indicated.

Under the baseline scenario, the report expected South Africa’s GDP growth to recover to 3.5% by 2014, which Mahajan described as the new growth base for the coming 15 years.

The figure fell well short of the 7% highlighted as necessary by the South African government to deal with the country’s chronic unemployment rate, which currently stood at above 25%.

Mahajan concurred that it would be insufficient to generate the jobs needed to deal with the problem, but said the outlook was constrained by South Africa’s prevailing power shortages.

“An important constraint on a faster pickup in growth is likely to be bottlenecks in electricity supply, which is already rubbing against peak demand and will continue to do so until fresh large-scale generation capacity comes on board and Eskom’s demand-side management measures for greater energy efficiency take firmer root,” the report noted.
 

Edited by: Creamer Media Reporter
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
 
Latest News
Updated 6 hours ago Government, in conjunction with industry clusters had to encourage preferential procurement in the mining industry, Department of Trade and Industry (DTI) capital equipment and allied services director Tapiwa Samanga has said. In a statement issued on Monday, he...
Neil Gopal
Updated 6 hours ago The South African Property Owners’ Association (Sapoa) has appealed to Rural Development and Land Affairs Minister Gugile Nkwinti to invoke the discretionary powers available to him under the Spatial Planning and Land Use Management Act of 2013 to prevent...
Updated 6 hours ago The Financial Services Board (FSB) has extended telecommunications group MTN’s broad-based black economic-empowerment trading platform MTN Zakhele’s exemption to the directive requiring over-the-counter (OTC) trading platforms to apply for a licence to operate,...
More
 
 
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 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 network, the funding and maintenance of these respective networks, and the push to move...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
 
 
 
 
 
This Week's Magazine
South African State-owned defence industrial group Denel has announced its fourth consecutive year of profits. The group's results for the financial year 2013/2014 were recently announced at its head office in Centurion, south of Pretoria. Revenues grew by 17%, net...
There is little opportunity for JSE-listed infrastructure company Group Five to grow shareholder value in the domestic market, says CEO Mike Upton. He says value can still be found in the private sector, in the renewable and industrial power sector, as well as in...
The National Association of Automobile Manufacturers of South Africa (Naamsa) has announced the event dates of the 2015 Johannesburg International Motor Show (JIMS). The event will take place from October 14 to October 25, 2015, at the Johannesburg Expo Centre, Nasrec.
UK engineering support services provider Babcock is set to deliver the largest order of global truck manufacturer DAF’s truck tractors in Southern Africa to bulk carrier road-based logistics company Ngululu Bulk Carriers (NBC), with 133 trucks to be delivered in...
Digital radio communications in the African local government space can open up the world, but have many challenges to overcome, notes integration and migration of legacy radio communications infrastructure with digital mobile radio company Emcom Wireless head of...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks