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Johannesburg – Economic growth in the sub-Saharan Africa (SSA) region has slowed down and the International Monetary Fund (IMF) forecasts growth to reach 1.6% in 2016.
This is the lowest in 17 years and, compared to the rest of the world, South Africa will be impacted the most.
This is according to the October 2016 Monetary Policy Review, issued on Monday at the South African Reserve Bank (Sarb) offices in Pretoria.
The review highlighted that the slowing growth in the SSA region was mostly due to declining commodity prices and increased foreign borrowings.
The SSA region only contributes 2.8% to global output and 0.1% to global growth. Its biggest trading partner is South Africa, taking 30% of the country’s exports. Since 2011, exports to SSA had contracted by 27.7% in dollar terms.
Trade with South Africa
Growth in SSA has slowed meaningfully in 2016, but it is important to keep in mind that South Africa runs a consistent trade surplus with SSA, said Elna Moolman, economist at Macquarie group. This means, despite the slowdown in SSA growth which weighed on these countries’ demand for South African exports, on a net basis South Africa still benefits from a trade surplus with these economies.
South Africa’s trade surplus with SSA has averaged 2 percentage points since 2000. The surplus had grown to 4.6% of gross domestic product (GDP) in 2015, according to the review.
Without SSA trade, South Africa’s overall trade balance would be -5.8% and not -1.25% as reported in 2015, stated the review.
Further, the SSA is an important investment destination for South Africa. The share of South African assets in the SSA has more than doubled over the past decade.
However, the low growth outcomes in the region could decrease yields to South Africa. Over the past decade the region achieved an average growth of 5.5%.
Trade policy and priorities are set on the basis of long-run expectations, said Moolman.
“It seems as if the IMF at this stage expects SSA growth to be bottoming this year. For merchandise goods exports in particular, the proximity to other SSA economies remains important [for South Africa].”
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