Download Document

Global Economic Outlook
May/June 2012
Agenda
Introduction
Session 1: Global outlook
Session 2: Africa
Session 3: South Africa
Q&A
Introduction
Introduction
The global economy is on a narrow path of slow and fragile recovery
Oil and commodity prices remain high and will continue to put further
pressure on the global economy
South Africa’s robust financial institutions and moderate fiscal and
external debt absorbed the impact of the global downturn to a large
extent.
However, the country needs to address its structural challenges
including, unemployment, education and inequality in order to be a
global economic player
Global Economic
Outlook 2012
Introduction
Recession:
Gross domestic
product (GDP)
Depression:
Business cycle:
A significant decline in activity across the economy, lasting longer than a
few months. It is visible in industrial production, employment, real
income and wholesale-retail trade. The technical indicator of a recession
is two consecutive quarters of negative economic growth as measured
by a country's gross domestic product (GDP)
Refers to the market value of all officially recognized final goods and
services produced within a country in a given period.
Is a sustained, long-term downturn in economic activity in one or more
economies. It is a more severe downturn than a recession, which is seen
by some economists as part of the modern business cycle.
The recurring and fluctuating levels of economic activity that an
economy experiences over a long period of time. The five stages of the
business cycle are growth (expansion), peak, recession (contraction),
trough and recovery. At one time, business cycles were thought to be
extremely regular, with predictable durations, but today they are
widely believed to be irregular, varying in frequency, magnitude and
duration.
Session 1: Global outlook
Global outlook
3.0%
2.0%
1.8%
1.9%
2011
2012
2.2%
1.0%
0.0%
2013
- 2016
2.0%
1.7%
1.3%
-0.3%
1.0%
0.0%
-1.0%
2011
• Asia
• Australasia
• North Africa and Middle East
• Sub-Saharan Africa
• Western Europe
• and • North America
• and • Latin America
Source: Economic Intelligence Unit, March 2012
2012
2013 2016
6.0%
4.0%
2.0%
0.0%
4.5%
4.3%
4.0%
4.2%
3.6%
3.5%
3.0%
2011
2012
2013 2016
6.0%
4.0%
2.0%
0.0%
3.1
%
4.0
%
4.7
%
2011
2012
2013 2016
4.4%
3.8%
2011
2012
4.8%
2013 2016
6.0%
4.0%
2.0%
0.0%
3.5%
2011
4.3%
4.6%
2012
2013 2016
Global outlook
GDP growth by region 1
10.0
8.0
6.0
4.9
3.8
3.0
GDP groth (% p.a)
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
2007
World
2008
2009
2010
Transition economies
2011
2012
2013
Middle East & North Africa
2014
2015
2016
Sub-Saharan Africa
Source: Economic Intelligence Unit, March 2012
The global economy is on a narrow path of slow and fragile Oil and commodity prices remain high and will continue to put
recovery. Many countries are struggling with a massive debt further pressure on the global economy
burden and high unemployment persisting to bog down their
economies and hampering growth.
Global outlook
GDP growth by region 2
8.0
GDP groth (% p.a)
6.0
4.0
4.2
2.0
3.0
2.3
1.6
0.0
-2.0
-4.0
-6.0
2007
World
2008
2009
North America
2010
2011
Western Europe
2012
2013
2014
Asia & Australasia (incl Japan)
2015
2016
Latin America
Source: Economic Intelligence Unit, March 2012
According to the Economist Intelligence Unit’s (EIU) March economic outlook, world GDP is expected to grow by 2.1% on
a market exchange rates basis in 2012, slowing down markedly from the previous two years.
Changes in global economic risks
Greater Russia region
- 2.4%
North American region
Europe region
- 0.9%
1000
- 1.2%
500
1,500
1000
0
1,000
Middle East region
500
500
2020
2050
0.8%
0
2008
2008
2020
2020
1500
2050
2050
1000
Latin America & the
Caribbean region
African region
500
1.8%
Asia pacific region
0
2008
0.9%
2020
2050
1.2%
600
2500
800
400
2000
600
Legend
400
200
Production (Mn tonnes)
200
0
1500
1000
2008
0
Consumption (Mn tonnes)
2008
2008
2020
2050
Compounded annual
growth rate consumption
Source: Energy Policy Scenarios to 2050, World Energy Council (values in mn tonnes)
2020
2050
500
0
2008
2020
2050
Energy intensity
Economic growth is closely related to growth in
energy consumption because the more energy is
used, the higher the economic growth. However, it
is possible to decouple energy consumption and
economic growth to some extent. More efficient
use of energy may entail economic growth and a
reduction in energy use.
800
700
600
500
400
300
200
100
Economist Intelligence Unit, KPMG calculations
1990
2000
World
Western Europe
North America
Latin America
Asia and Australiasia
Middel East and North Africa
East-Central Europe
Sub-Saharan Africa
0
2010
2015
Cumulative investment in energy infrastructure require 2011 – 2035
Coal - $1.1 trillion
Bio-Fuels - $0.3 trillion
3% 1%
Natural Gas - $9.5 trillion
Power- $16.9 trillion
45%
25%
26%
Oil- $10.0 trillion
World Energy Outlook 2011, (2010 real terms)
Global outlook
United States
Europe
 The economy grew by 1.7% in
2011, but grew by 2.8% in Q4
of 2011.
 European economic growth
slowed during 2011 to 1.5%
and is expected to contract
further in 2012 to -0.3%, before
a modest recovery in 2013.
 Manufacturing in Japan is
already experiencing a vshaped recovery after the
March 2011 earthquake and
tsunami.
 Inflation should remain
relatively low and contract to
around 2.2% in 2012 from the
2.7% observed in 2011.
 GDP is expected to grow at
around 1.5% in 2012 on the
back of reconstruction activities
and a recent upswing in
machinery exports and local
consumption.
 The inflation rate for 2011
doubled to 3.2% from 1.6% in
2010.
 Growth prospects for Q1 2012
are around 2 to 2.2% on the
back of a gain in consumer
confidence’s subsequent retail
sales and manufacturing.
 Persistently high
unemployment and risks of
downturns in markets abroad
will keep the FED’s policy rate
at very low levels until even as
late as 2014.
 The European debt crises
threatened to derail global
recovery for the last two years
Japan
Global outlook
Emerging Markets
BRICS
The Next 11
 Fears surrounding an
economic downturn have lead
EM central banks to either cut
their interest rates or postpone
monetary tightening during
2011.
 The BRIC countries are
recognised as having very
large economies and
populations, with unravelled
growth potential in foreseeable
years.
 The Next 11 consist of South
Korea, Iran, Mexico, Turkey,
Philippines, Indonesia, Egypt,
Nigeria, Pakistan, Vietnam and
Bangladesh.
 Market expectations are that
EM countries will outperform
developed countries between
2013 - 2016, as interest rate
differentials will favour
investment into these EM
countries over that of the
OECD economies.
 The Brazilian economy
experienced rapid expansion in
the last decade with strong
economic growth
 Russia experienced strong
economic growth over the past
few years, but manufacturing
and foreign investment slowed
down since the global
downturn.
 These economies are smaller
in size than the BRIC countries,
but with its large population
size and growth rates of above
the global average, promises
favourable opportunities for
future investment and market
growth.
Session 2: Africa
Where are we now?
Structural changes in Africa enabled significant increased labour productivity over the last decade.
Rapid urbanisation is allowing increased access to markets and it is expected that by 2030, 50% of
Africans will be living in cities
Overarching theme in Africa has been the inability of economic growth to create employment to a
sufficient degree.
Increasing water stress and loss of habitat and biodiversity are further areas of concern, with
constrained agricultural production and food insecurity increasing.
Improvement in physical, legal and governmental infrastructure, together with the reduction of
corruption, crime and unfair business practices are needed to allow for an enabling environment able to
attract investment.
Intra-African trade has been lacking and will benefit greatly from these improvements.
South African trade comprise 50% of total African trade, with only 11% of this number being intraAfrican.
Where are we now? Sub –Saharan Africa
Angola
• Angola’s increased oil output
contributes about 85% of
GDP and recent natural gas
developments will result in a
high GDP growth rate.
Democratic Republic of Congo
• Congo (or the Democratic
Republic of Congo), though
incredibly richly endowed with
natural resources, remain one
of the countries which citizens
are among the poorest in the
world
• very high rates of inflation
• agriculture industry –
employing more than 75% of
the working population
Ethiopia
• Ethiopia has been one of the
fastest growing African
countries in the past few
years as a result of some
modest economic reforms
• Africa’s largest exporter of
coffee and second largest
maize producer, as well as a
big producer of livestock
Where are we now? Sub –Saharan Africa
Ghana
Mozambique
• Ghana remains one
of the world’s biggest
gold producers and
other exports include
cocoa, natural gas,
timber and
diamonds.
• Mozambique is a
resource rich country,
producing food,
beverages,
chemicals,
aluminium, petroleum
products
• Infrastructure
development,
especially electricity,
is necessary to
increase output and
create more
investment
opportunities.
Nigeria
• Nigeria’s vast
population size and
well developed
financial and
communications
sectors continue to
attract mobile phone
networks and banks
looking to capitalise
on the large amount
of unbanked
individuals.
Zambia
• Zambia is a large
producer and
processor of copper
and this hard
commodity is its main
export, with
agriculture being an
important pillar of the
economy.
Where are we now?
Most of the fastest developing economies are in the Sub- Saharan region
2001 - 2010
China
10.5
Ethiopia
8.4
2001 - 2010
Myanmar
10.3
Chad
7.9
Cambodia
7.7
Source: IMF World Economic Outlook, February 2012
Nigeria
8.9
Kazakhstan
8.2
Mozambique
7.9
Rwanda
7.6
China
9.5
Ethiopia
8.1
Tanzania
7.2
Congo
7.0
Zambi
a
6.9
India
8.2
2011- 2015
Angola
11.1
2011 – 2015 : Forecast
Mozambiqu
e
7.7
Vietnam
7.2
Ghana
7.0
Nigeria
6.8
Where are we now?: North Africa
Algeria
Egypt
• Algeria is
renowned for its
oil and gas
reserves, and
these resources
have dominated
its export
industry and
continue to
contribute
greatly towards
the country’s
GDP
• Egypt
experienced a
period of
accelerated
growth following
reforms to
stimulate
investment
during the last
five years
• The economy is
based on
agriculture as
well as exports
of their natural
resources
including oil,
coal, natural gas
and hydro
power.
Libya
• Libya is slowly
recovering from
a crippling civil
war and like
some of its
neighbouring
countries
Morocco
Tunisia
• Morocco is the
world’s largest
exporter of
phosphorus and
mining,
construction and
manufacturing
make up just
over half of the
country’s GDP.
• The high import
cost of oil will
continue to put
pressure on the
Moroccan
economy as the
price continue to
remain high.
• Unemployment
and inflation is
relatively low
• The country has
a diversified
economy,
ranging from
mining,
agriculture,
manufacturing
and
petrochemicals
to tourism which
was heavily
impeded on
during the
revolt.
• Inflation remains
relatively
moderate,
• High levels of
unemployment,
especially
among its youth.
Where are we going?: Future trends
Current
22
The number of people per square
kilometre (population density)
(UN)
The future
60
The number of people per
square kilometre (population
density) by 2050 (UN)
10%
6%
Old age dependency ratio of
10% by 2050 (UN)
Old age dependency ratio (UN)
> 1 billion
Africa’s population (UN)
5.5%
Sub-Sahara GDP growth rate in
2011 (f) (AEO)
>1.8 billion
Africa’s population by 2050 (UN)
4.9%
Sub-Sahara GDP growth rate in
2015 (EIU)
Where are we going?: Future trends
•Infrastructure expansion and
network growth are areas of
development in the future,
speeding up national
processes and connecting
Africa to the rest of the world.
Infrastructure
expansion
•Africa is a net importer of
food and unable to meet
local demand.
•With 60% of the world’s
uncultivated arable land
and low crop yields Africa
has enormous potential for
a “green revolution” similar
to those seen in Asia and
Brazil
Food import
Challenges
Africa faces
Climate
change
•Africa currently spends $45
billion per annum on
infrastructure, when it should
be spending about $93
billion in order to catch up
with other developing
regions in the next ten years.
•The impact of climate
change could be severe,
seeing that 96% of Africa’s
agriculture is extremely
rainfall dependent
Session 3: South Africa
SA and the global economy
SA’s economy’s performance
since democracy (1994 to 2010)
×Population
10 million people
×Economy
67% ( R1100 bn to R1834 bn)
×GDP per capita
28% ( R28 536 to R36 591)
×Real Disposable income
32% ( R17 775 to R23 569)
SA links with global economy and
global downturn
×SA withstands global downturn
×Robust financial institution; and
×Moderate external debt
×Current world economic impact on SA
×Driving away potential & existing investors
Investors
become more risk averse
move assets from emerging
markets to safer investment environments
SA and the global
economy
Global factors affecting SA
economy
×Slowdown in global demand Rand will experience a
prolonged depreciation
×E.g. Slowdown in Chinese economy (larger trading
partner)
×Cost push inflation(food and oil prices ) negative impact
on SA economy
SA as part of the BRICS
×New member of BRICS
×SA ranked amongst the best in the world in;
Financial sector, strength in reporting & auditing
standards, protection of investors rights
Large sized economy
Where are we now?
Europe's financial crisis
South Africa’s impact on the financial crisis
Affects world
economic
growth
Continues to
way down
financial
markets and
hamper global
growth
Strong links to
the euro zone (
largest trading
partner)
Financial crisis
has decreased
demand for
goods
Driven away
potential and
existing investors
Europe will take
long to recover,
SA would have to
change focus to
trade with china
and India
Where are we now?
A challenging environment
Actual
Estimate
Structural changes seen in
SA
Forecast
2010
3.7
2011
4.9
2012
3.6
2013
3.8
2014
4.2
4.9
4.6
4.1
4.1
4.1
Gross fixed capital formation
-1.6
4.3
4.1
4.5
6
Gross domestic expenditure
4.2
4.1
3.9
4.2
4.9
Exports
4.5
6
2.9
5.8
6.6
Imports
9.6
9.4
7.2
7.1
8.3
Real GDP growth
2.9
3.1
2.7
3.6
4.2
Headline CPI inflation
4.3
5
6.2
5.3
5.1
Final household consumption
Final government consumption
• Significant shift towards
service sectors, major
contributor to GDP
• Finance, real estate and
business services sector
grown from 16% to over 20%
of GPD
• Decline in the role of mining
and agricultural sectors
• 12% of the country is
suitable for planting crops
rethink approach to
agriculture to improve food
security
• Hold worlds largest reserves
of gold, platinum, chrome ore
and magnesium ore
Where are we now?
South African competitiveness relative to peers
Overall
ranking
4th
Market
size 9th
Institutio
ns 1st
Competit
iveness
ranking
to peers
Macro
environ
ment
6th
Labour
market
efficienc
y 8th
Health
and
primary
education
9th
Infrastru
cture
ranked
5th
Where are we now?
South African competitiveness relative to peers
Weakness
Positive impact on FDI’s
Strengths
Business institutions
ranked 4th on financial
development market
Business sophistication
ranked 38th (out of 142
countries)
Ineffective
Inadequate
Government
Educated
bureaucracy workforce
Restricted
Labour
regulations
SA
Problematic
factors
for doing
business
Goods market efficiency
ranked 32nd (out of 142
countries)
Innovation achieved
ranked 41st (out of 142
countries)
Corruption
Crime
Theft
Where are we going?
Tackling unemployment, poverty and education
Unemployment
Education
• Unemployment
rate dropped from
31% (2005) to
23.9% (2011)
• Two key trends
• Discourage work
seekers,
• High rate of
youth
unemployment,
71% of
unemployed are
aged between
15-34 years.
• Poor quality of
education
• Literacy and
numeracy test
scores remains
low by African and
global standards
• Government
dedicates 6% of
GDP to education
• SA’s teachers are
amongst the
highest paid in the
world
Poverty
• SA considered an
under- middle
income country
• 39% of population
lives under the
poverty line of
R418 per person
per month
Governments
plan
• NPC plans to reduce
the number of people
living under the
poverty line to zero
by 2030
• Create 11 million
jobs in 20 years
• Improve education
system
Where are we going?
Investor concerns
Investors have
ranked the impact
of government
bureaucracy, the
inadequate skills
of the work force,
South Africa’s
restrictive labour
legislation,
corruption and
crime and theft as
their most
significant
concerns and
impediments for
doing business in
South Africa.
South Africa is
Foreign investors
seen as a country are concerned
with low levels of
with the lack of
labour market
flexibility that
efficiency
exist with regard
to companies’
SA ranked
ability to
amongst the
worst in the world determine wages
when considering and the tensions
that exist with
the rigidity of our
labour
unions.
hiring and firing
practices.
Investors also
indicate that the
relatively poor
health of our
labour force is a
worrying factor
when they
consider
investments in
the country.
Although our
The poor security
infrastructure
situation and the
seems to be in a impact and cost
relatively good
of violence and
condition if
crime for
compared to the
business are a
rest of Africa,
cause for concern
investors are
and we are
worried about
ranked amongst
infrastructure
the worst in world
maintenance and
on this aspect.
are of the opinion
that our
infrastructure
needs upgrading.
1. Infrastructure
development
2. Agriculture
3. Mining
4. Manufacturing
5. The ‘green’ economy
6. Tourism
• A comprehensive drive to
enhance both social
equity and
competitiveness
• Systemic changes to
mobilise domestic
investment around
activities that can create
sustainable employment
• Strong social dialogue to
focus all stakeholders on
encouraging growth in
employment-creating
activities.
IPAP 2
Six priority areas to
job creation
Policy direction
The New Growth Path
Where are we going?
• Sets out objectives as
well as ways to promote a
more labour absorbing
industrialisation path in
order to combat the
country’s unemployment
problem and to increase
the participation of
historically disadvantaged
people and marginalised
regions in the core of the
industrial economy.
• IPAP2 is “a radical shift to
grow a developmental
economy by taking
deliberate decisions to
ensure that investment
targets production sectors
of the economy and to
arrest the decline in
manufacturing and
accelerate skilled
employment creation.”
Where are we going?
The State of the Nation Address, 2012/13 Budget and the MTEF
The NDP highlights the following 9 key issues within the South
African economy
Job creation
Infrastructure
expansion
Transition to a
low carbon
economy
Transformation of
urban and rural
spaces
Education and
training
Providing quality
health care
Building a
capable state
Fighting
corruption
Transformation
and unity
5 major infrastructure
programmes
Geographicallyfocused
Integrated
approach
Mining,
transport &
agriculture
R4.8 billion was allocated to
expanded public works
programme and the New Jobs
fund that began operating in
June of 2011, received over 2500
applications and committed over
R1 billion in allocations to various
projects.
Where are we going?
The State of the Nation Address, 2012/13 Budget and the MTEF
Consolidated
Budget
R million
Total receipts
Total payments
Budget balance
% of GDP
2011/12
2012/13*
2013/14**
2014/15**
830 210
972 547
-142 337
-4.8%
904 830
1058321
-153491
-4.6%
1 005 871
1 149 125
-143 255
-4.0%
1 118 183
1 239 699
-121 156
-3.0%
Tax proposals (R/m)
Personal income tax
Business tax
Property tax
Indirect tax
National budget revenue
after tax proposals
2012/13
-4 300.00
-6 350.00
8 342.00
904 830.00
2014/15
2013/14
2012/13
2011/12
2010/11
2009/10
2008/09
2007/08
2006/07
3.0%
1.3% 1.7%
2.0%
1.0%
0.0%
-1.0%
-2.0%
-1.0%
-3.0%
-4.0% -3.0%
-3.0%
-5.0%
-4.0%
-4.6%
-6.0%
-5.3%-4.8%
-7.0%
-7.3%
-8.0%
2005/06
% of GDP
Budget balance as % of GDP
• Government is taking some steps to
improve the conditions for investors
• Government aims to support both the
Industrial Development Zone (IDZ) and
Special Economic Zones (SEZ)
• Government allocated R2.3 billion of
the R15.8 billion to economic services
and environmental protection to the
IDZs and SEZs.
Conclusion
Conclusion
The challenging global economic environment translates to a significant
slowdown in demand from developed economies, directly affecting
developing and export markets the world over.
Prudent macroeconomic policies should be followed by different
countries to ensure a stable, albeit slow, road to recovery of the global
economy.
Although South Africa has made significant progress since becoming a
democratic country 18 years ago, structural inefficiencies must be
addressed in order to stake a claim as a competitive developing
economy on the world stage.
Q&A
Q&A
Thank You
For more information
please contact the
Fasset Call Centre
on 086 101 0001
or visit www.fasset.org.za