Weaker recovery in the world economy over the past three months has seen the International Monetary Fund (IMF) slightly lowering South Africa’s growth forecast for 2012 to 2.6% from 2.7% projected in April.
Although 2012 growth projections for the eurozone remained unchanged in the Economic Outlook (WEO) Update, published this week, growth rates for the UK and US were lowered to 0.2% and 2%, respectively.
“South Africa is a small, open economy that is vulnerable to what happens in the developed economies, especially through the trade links and by extension our manufacturing sector, which is in close correlation with our export sector,” Absa Capital macro economist Ilke van Zyl told Engineering News Online.
The country’s projected growth rate for 2013 was also lowered to 3.3% from 3.4% in the April forecast.
Van Zyl pointed out that although the projected growth rate of 3.3% for next year, which would hinge on the situation in the eurozone, was an improvement on the 2012 growth forecast, it was still not seen as significant growth.
“This suggests sluggish growth going forward, hampered by high debt levels,” she noted.
Similarly, sub-Saharan Africa’s growth for 2012 was lowered to 5.4%, from 5.5%, but remained the same for next year at 5.3%. This marked a fairly robust growth trend, which the IMF attributed to the region's relative insulation from external financial shocks.
“The sub-Saharan Africa economy is bucking the global growth trend; it is no longer Asia,” Van Zyl said.
Efficient Group economist Merina Willemse stated that higher growth in the region, compared with South Africa, was driven by countries such as Angola, Zambia and Nigeria.
On a global scale, the IMF report projected growth this year to remain relatively weaker than in 2011, especially in regions connected more closely with the euro area.
However, in contrast with the broad trends, growth in the Middle East and North Africa would be stronger in 2012 to 2013 relative to last year, as key oil exporters continued to boost oil production and domestic demand, while activity in Libya was rebounding rapidly after the unrest in 2011.
The IMF noted in its updated WEO that in the past three months, financial market and sovereign stress in the euro area periphery have ratcheted up close to end-2011 levels, while growth in a number of major emerging market economies has been lower than forecast, partly owing to a somewhat better-than-expected first quarter that projected world growth to be 3.6% in 2012.
However, the revised baseline projections in the WEO Update suggested that these developments would only result in a minor setback to the global outlook, with global growth at 3.5% in 2012 and 3.9% in 2013, marginally lower than 3.6% in the April report.
Willemse maintained that Europe’s economic issues would take time to resolve and that recovery would be slow. She, however, noted that 2012 would be the turning point.