http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.16Change: 0.01
R/$ = 11.79Change: 0.04
Au 1212.10 $/ozChange: 7.42
Pt 1158.50 $/ozChange: 6.50
 
 
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 Letters Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Aug 03, 2012

SA faces downside risks from Europe and China, bank warns

Back
GDP|Africa|Eskom|Industrial|Africa|Europe|Brazil|China|India|South Africa|Bank|Energy|Industrial Products|Products|Gill Marcus|Power|Pravin Gordhan|Sandeep Mahajan|Simulation
|Africa|Eskom|Industrial|Africa|||Energy|Products|Power||
gdp-city|africa-company|eskom|industrial|africa|europe|brazil|china|india|south-africa|bank|energy|industrial-products|products|gill-marcus|power|pravin-gordhan|sandeep-mahajan|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%.

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, the World 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 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 non-oil commodity prices would shave 1.7 percentage points off South Africa’s growth rate. In terms of 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: Martin Zhuwakinyu
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other News This Week News
While economic forecasts for the African continent are most favourable, African airlines may not be able to benefit from the expected growth in the region’s gross domestic product (GDP), International Air Transport Association VP: Africa Raphael Kuuchi has warned....
The Automotive Production and Development Programme (APDP) will need to change substantially post 2020, says Metair Investments South African operations COO Ken Lello. “We must not make tweaks. We have to change. What we are doing is not sustainable.”
Banking group Absa’s forecast is for the rand to end the year at around R13 against the dollar, weakening further to R13.50 by 2016, says Absa sectoral analyst Jacques du Toit. He warns that possible interest rate hikes in the US may see capital being pulled from...
More
 
 
Latest News
Updated 1 hour 3 minutes ago Power utility Eskom said it would extend power cuts to 2 000 MW of electricity from 12:00 to 22:00 on Friday due to a shortage of generating capacity. The cash-strapped State utility, which has been forced to reduce electricity supply in Africa's most advanced...
Updated 1 hour 6 minutes ago The Department of Telecommunications and Postal Services (DTPS) has set aside R200-million of its R1.4-billion budget this year to kickstart the first phase of South Africa (SA) Connect national broadband strategy. Over the next three years, the department aimed to...
Updated 2 hours 7 minutes ago The Department of Trade and Industry (DTI), which last year committed to the initial creation of more than 100 black industrialists within three years, has developed a draft policy framework to guide the introduction of financial and nonfinancial support mechanisms...
More
 
 
Recent Research Reports
Steel 2015: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2015 report provides an overview of the key developments in the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon...
Projects in Progress 2015 - First Edition (PDF Report)
In fact, this edition of Creamer Media’s Projects in Progress 2015 supplement tracks developments taking place under the Renewable Energy Independent Power Producer Procurement Programme, which has had four bidding rounds. It appears to remain a shining light on the...
Electricity 2015: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2015 report provides an overview of State-owned power utility Eskom and independent power producers, as well as electricity planning, transmission, distribution and the theft thereof, besides other issues.
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
 
 
 
 
 
This Week's Magazine
While economic forecasts for the African continent are most favourable, African airlines may not be able to benefit from the expected growth in the region’s gross domestic product (GDP), International Air Transport Association VP: Africa Raphael Kuuchi has warned....
The Automotive Production and Development Programme (APDP) will need to change substantially post 2020, says Metair Investments South African operations COO Ken Lello. “We must not make tweaks. We have to change. What we are doing is not sustainable.”
Banking group Absa’s forecast is for the rand to end the year at around R13 against the dollar, weakening further to R13.50 by 2016, says Absa sectoral analyst Jacques du Toit. He warns that possible interest rate hikes in the US may see capital being pulled from...
The Dispute Resolution Centre at the Bargaining Council for the Civil Engineering Industry (BCCEI) is now open to handle party-to-party disputes. The BCCEI represents the interests of all level four to nine Construction Industry Development Board companies.
FREDRIK JEJDLING Sustainability becomes an important part of a business’ decision-making process
Communications technology firm Ericsson sub-Saharan Africa head Fredrik Jejdling says the company’s commitment to sustainability and corporate responsibility has been integrated into all facets of its operations, which has provided it with sustainable revenue...
 
 
 
 
 
 
 
 
 
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
Subscribe Now for $96 Close
Subscribe Now for $96