20 May 2010
The South African government performed “really well” during the recent global financial crisis, the International Monetary Fund (IMF) said on Wednesday.
“South Africa is a classic case of a country building buffers in the good times and using those buffers when the crisis hit,” IMF economist Abebe Selassie told a briefing in Sandton, Johannesburg on his organisation’s outlook for sub-Saharan Africa for 2010.
One of the least noticed aspects of the global downturn had been the resilience of the sub-Saharan Africa region, Selassie said.
“Previous global economic slowdowns had a much more damaging impact, but this time the global downturn was much sharper but the dislocation was far less.”
Selassie said that as the global financial crisis started to unfold, economic policies were directed quickly and effectively towards ameliorating the impact of the external shocks.
“Most governments that anticipated the slowdown made plans to accelerate public spending growth and on the monetary policy side, policy interest rates were also reduced.”
SA economy ‘to grow by 2.6% in 2010’
Selassie predicted that South Africa’s economy would grow by 2.6 percent for 2010.
“But I will be going back to Washington and revising it. It’ll probably be a quarter of a percentage point higher. So growth will be expected to come in around three percent for South Africa in 2010,” he said.
Earlier this month, Finance Minister Pravin Gordhan also said the country’s economy might grow more than the 2.3 percent for 2010 that he had anticipated in February.
South Africa’s economy contracted by 1.8 percent in 2009.
Varied impact in sub-Saharan Africa
Selassie said the impact of the global crisis on countries in sub-Saharan Africa had varied.
“The countries most severely affected were middle-income countries (such as South Africa and Botswana) and oil-exporting countries … however, the impact on low income countries was relatively light.”
However, in sub-Saharan Africa job losses and reduced employment opportunities had affected millions of households.
“Just in South Africa some 900 000 jobs were lost during 2009, further increasing the high level of unemployment while elsewhere the impact of the slowdown on formal sector job losses was probably proportionately less.”
While South Africa and sub-Saharan Africa were bouncing back from the growth slowdown, risks remained, Selassie said. These included a hiatus in the global recovery.
“There is very limited room left for policy manoeuvres in the advanced economies in the event of negative shocks.”
There was also the risk that there would be shortfalls in official finance. “Although bilateral aid held up well in the global recession and international financial institutions ratcheted up their grants and lending, the outlook for official finance has been worsened by the permanent hits suffered by the economies of major donors.”
Selassie said another risk could arise from volatile commodity prices.
“Even if the global recovery remains on track, renewed spikes or even sustained shifts in commodity prices -particularly minerals and oil – remain possible.”
Selassie said internal risks included political unrest and a deterioration in financial systems in some countries.
“As developments in Guinea and Madagascar in 2009 showed, political instability can have strong negative effects on economic activity.”