Economy 'won't be as good'

Johannesburg - Over the next five years the global economic environment will be less rosy than in the past five.

According to Nedbank economist Dennis Dykes global demand has shrunk too much. He was speaking at the South African Institute of Chartered Accountants' conference on financial services in Kempton Park.

Dykes believes developing markets are on the mend, thanks to China's lead.

"Developing markets will increasingly dominate," he said.

"In the medium term, developing countries will continue to struggle owing to high debt levels and weakened financial markets."

"Developing countries will fare considerably better thanks to better demographics - that is to say younger inhabitants, better financial situations and raw materials."

South Africa and Africa will benefit, according to Dykes, but things will not quickly return to the prosperous years before the recession.

"Household debt as a percentage of disposable income is still very high."

"The situation is very different from that at the beginning of the upturn in 2001, when it was only about 50%. Household indebtedness is now over 70%, and credit growth to consumers will therefore be more modest. House prices will rise again, but not at the same rate as previously."

Dykes believes that interest rates could still fall by another half a percentage point. "Inflation is heading towards the Reserve Bank's target range, but Eskom's proposed tariff increases could exert upward pressure on it."

- Sake24.com

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