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SA is Africa's biggest eurozone casualty

Oct 12 2012 14:46 Reuters

Flags of the EU member states fly outside the European Parliament in Brussels. (AFP, File)

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Tokyo - Europe's debt crisis and the related cooling in China is weighing on Africa, but even a sharp worsening of the crisis would be unlikely to choke off the region's growth, a top International Monetary Fund official said on Friday.

Most countries in Africa have largely escaped major harm, with the exception of South Africa, which has financial and trade ties with ailing eurozone markets.

“We think the crisis in Europe has had an adverse impact on sub-Saharan Africa, but not, to date, on a scale that would derail growth in the region,” IMF Director for Africa Antoinette Sayeh told Reuters.

“Of course, a severe intensification of the eurozone crisis could have a sizeable adverse impact on the global economy, including on commodity prices, with pass-through of these developments to African economies.”

“That said, we think it is likely that such a shock would slow, but not derail, growth in sub-Saharan Africa,” she said.

An IMF report on Friday projected Africa would grow 5% this year and next. The region is home to some of the world's fastest-growing economies, many of them, such as Mozambique, Tanzania, Kenya, Uganda and Ghana, buoyed by new oil and gas finds.

The IMF expects Mozambique to grow 8.4% next year, the Democratic Republic of Congo 8.2%, Ghana 7.8% and the Ivory Coast 7%.

“Commodity prices make a big difference to the region,” Sayeh said. “Notwithstanding what's going on in Europe, commodity prices have been kept at a reasonably robust level because of strong demand from emerging economies, notably from China. Our best guess is that sub-Saharan Africa will maintain the 5% growth recorded in 2010-11 through 2012-13.”

However, if China's economy slows more that could prompt a fall in commodity prices and trade with Africa, hurting growth.

The IMF warned this week of risks to emerging Asia if the eurozone crisis escalates and the United States does not avoid its “fiscal cliff.” Beijing has repeatedly assured investors that China's economy is on track to meet the official growth target of 7.5% for 2012.

“By and large, the IMF view is that China's slowdown represents a soft rather than a hard landing and, as a result, is unlikely to have a significant impact on commodity prices,” Sayeh said. “Of course high growth rates in China are welcome, but we don't see that Chinese growth rates are decelerating so sharply that will have a significant impact on growth in Africa”.

South Africa, the region's largest economy but one of its worst performers, is hurting the most from the eurozone crisis. Earlier this week, the IMF cut its growth forecast for South Africa to about 2.6% for 2012 and 3% next year.

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africa  |  sa economy  |  europe debt crisis


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