Despite some recent strong performances on the domestic and international financial markets, the underlying reality of the global economy is one of fragility.
The latest individual to add his voice to the chorus of warnings, is African Development Bank (AfDB) chief economist Professor Mthuli Ncube.
He says Africa’s 2012 economic growth outlook is facing headwinds from a range of sources, not least the current crisis in Europe.
The bank currently expects continentwide growth of 4.5% in 2012, underpinned by a sub-Saharan Africa economic expansion of 5.3% – excluding slow-growing South Africa, the rate of growth in the rest of the subregion is estimated at 5.9% for the year.
But the outlook is highly sensitive to the economic fortunes or misfortunes of Europe, with Ncube indicating that a one per cent fall in the territory’s growth will shave 0.5% off African economic growth.
Lower European growth will be felt primarily through lower export earnings and a decrease in tourism-related earnings, especially in North Africa, which is still stabilising from the after effects of the ‘Arab Spring’.
But there is also a risk of lower financial inflows in the form of aid, investment and remittances, as well as the potential for “contagion effects” spreading to African banks.
Ncube is also concerned that China, which acted as a key shock absorber during the earlier phases of the global economic crisis, may not be in a position to offer such support this time around.
The slowdown in China poses a particular risk for African commodity exporters, as it could send a “negative signal” on commodity prices.
The AfDB has already revised lower its growth outlook for South Africa, Africa’s largest economy, from 3.2% earlier in the year to around 2.9%.
The revision is in line with downgrades reported recently by the South African Reserve Bank (from 2.9% to 2.7%) and the World Bank (from 3.1% to 2.5%).
Finance Minister Pravin Gordhan has also indicated that growth is likely to fall short of the 2.7% forecast by the National Treasury in February – he is due to offer an official update in the upcoming Medium Term Budget Policy Statement in October.
The World Bank warns that South Africa is vulnerable to both the slowing economies of Europe, which consumes many of its industrial exports, as well as to a slowdown in China, which consumes many of its commodities.
For Africa as a whole, Ncube also warns of other headwinds, including the potential for rising inflation, food price shocks in light of the drought conditions in North America and uncertainties surrounding the oil price outlook.
Nevertheless, he is convinced that several internal and external growth drivers remain intact and that African countries will continue to grow faster than the global average.
For the sake of all Africans, I hope he is right.