World Bank pre­dicts 2.7% global growth

The Star Early Edition - - BUSINESS REPORT - Wise­man Khuzwayo

THE WORLD Bank said yes­ter­day in its Jan­uary 2017 Global Eco­nomic Prospects re­port that global eco­nomic growth was fore­cast to ac­cel­er­ate mod­er­ately to 2.7per­cent.

Sub-Sa­ha­ran African growth was ex­pected to pick up modestly to 2.9per­cent this year as the re­gion con­tin­ued to ad­just to lower com­mod­ity prices, ac­cord­ing to the re­port.

The SA Re­serve Bank and Na­tional Trea­sury pre­dicted growth of just more than 1per­cent for South Africa this year.

Pres­i­dent Ja­cob Zuma’s fore­cast of a 2.9 per­cent eco­nomic growth rate for this year at the ANC’s 105th birth­day cel­e­bra­tions on Sun­day has been rub­bished by econ­o­mists.

Nige­ria is fore­cast by the World Bank to re­bound from re­ces­sion and grow at a 1per­cent pace, while An­gola is pro­jected at a 1.2per­cent pace.

Growth in ad­vanced economies is ex­pected to edge up to 1.8per­cent this year. Fis­cal stim­u­lus in ma­jor economies – par­tic­u­larly in the US – could gen­er­ate faster do­mes­tic and global growth than pro­jected, although ris­ing trade pro­tec­tion could have ad­verse ef­fects.

Growth in emerg­ing mar­ket and de­vel­op­ing economies should pick up to 4.2 per­cent this year from 3.4 per­cent in the year just ended amid modestly ris­ing com­mod­ity prices.

Nev­er­the­less, said the World Bank, the out­look was clouded by un­cer­tainty about pol­icy di­rec­tion in ma­jor economies. A pro­tracted pe­riod of un­cer­tainty could pro­long the slow growth in in­vest­ment that was hold­ing back low-, mid­dle-, and high-in­come coun­tries.

Lo­cal out­look

Mo­men­tum In­vest­ments said this week that growth in South Africa’s econ­omy was set to im­prove this year, with agri­cul­tural out­put ex­pected to re­cover, thanks to higher rain­fall, while ex­ports were likely to pig­gy­back off slightly bet­ter global eco­nomic ac­tiv­ity and a mod­est re­vival in com­mod­ity prices.

Mo­men­tum’s econ­o­mists, Her­man van Papen­dorp and San­isha Packirisamy, said growth, how­ever, was likely to re­main slug­gish as po­lit­i­cal un­cer­tainty ahead of the ANC’s elec­tive con­fer­ence in De­cem­ber de­terred fixed in­vest­ment and pur­chases of bigticket con­sumer goods.

“Re­stock­ing in re­sponse to higher growth ex­pec­ta­tions could lift growth to above 1 per­cent in 2017.”

They said though lower food in­fla­tion and a prob­a­ble shift to looser mon­e­tary pol­icy in the sec­ond half should pro­vide some re­lief to con­sumers, house­holds re­mained ex­posed to a bleak jobs out­look, high lev­els of in­debt­ed­ness and the po­ten­tial for higher taxes.

“Based on our fore­casts for head­line in­fla­tion to drop more mean­ing­fully on a twoyear out­look, we ex­pect fur­ther in­ter­est rate cuts in 2018 to ben­e­fit con­sump­tion spend.

Mo­men­tum said although South Africa scored higher on the World Bank gov­er­nance in­di­ca­tor, the rat­ings agen­cies warned that ris­ing per­cep­tions of po­lit­i­cal in­ter­fer­ence in key spheres of gov­ern­ment in­sti­tu­tions threat­ened the coun­try’s macroe­co­nomic per­for­mance, pub­lic fi­nances and con­se­quently the rat­ings out­look.

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