20 Jun.
IMF upgrades South Africa’s growth outlook.
In its World Economic Outlook (WEO), released on Friday, the International Monetary Fund (IMF) raised its April estimate of 3.5 percent for the current year by a half percentage point to 4 percent and next year’s estimate from 3.8 percent to 4.2 percent.
In February, the Treasury predicted growth of 3.4 percent this year, while recent forecasts by private sector economists have ranged between 3 percent and 3.8 percent.
The improved outlook is in contrast to the downgrading of the prospects of the advanced economies – by 0.2 percentage points; and it exceeds the 0.1 percentage point upgrade of emerging and developing economies as a whole.
The IMF sliced 0.1 percentage points off its world forecast to 4.3 percent.
Alfredo Cuevas, the IMF representative in South Africa, said South Africa’s upgrade followed the recent visit by an IMF team to the country and the Statistics SA report that the economy grew a surprise 4.8 percent between January and March, after expanding by an upwardly revised 4.5 percent in the previous three months. The figures represent quarter-on-quarter changes, which have been adjusted for seasonal factors and multiplied by four to show an annualised trend.
There were no changes in the IMF forecasts for China and India from the April estimates of 9.6 percent and 8.2 percent, respectively.
Commenting on the “mild slowdown of the global expansion”, the WEO highlighted weakness in the US economy and concerns about government finances in some euro zone countries. It said volatile markets reflected concerns about sovereign risks.
It referred to “negative surprises” including supply disruptions in Japan following an earthquake and tsunami. But it noted in contrast growth surprised on the upside in the euro area “powered by more upbeat investment in Germany and France”.
However, the IMF’s concern about potential debt default was underscored last week, when rating agency Standard & Poor’s cut Greece’s credit rating three notches to CCC, saying the country was likely to default on its debts at least once by 2013, according to AFP.
Bloomberg reported Greece might need up to e45 billion (R435bn) in new loans to avoid a default. This comes after a e110bn lifeline last year from European states and the IMF.
Greek Prime Minister George Papandreou is battling to keep his government afloat, after a cabinet reshuffle, as euro zone finance ministers met at the weekend to discuss the problems.
Perceptions of risk rose and stock markets fell at the start of the trading day on Friday. The JSE all share index dropped from more than 31 000 to a low of 30 458.9 before regaining some ground to close at 30 669.
While fallout from Europe’s problems has a knock-on effect on global markets, South Africa’s financial position is relatively sound. Moody’s Investors Service said on Friday: “South Africa’s A3 government ratings and stable outlook reflect a combination of prudent economic policies that have improved its debt dynamics considerably over the past decade plus a number of ongoing socioeconomic challenges that are likely to constrain the rating at this level for the foreseeable future.”
Source: Business Report
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