Johannesburg - Specialist banking group
Investec is expecting South Africa to experience growth of 2.5%
in 2010 and 3.7% in 2011, with 2012 seeing a move above 4.0%, both locally
and globally.
"With the 2008/2009 recession now thankfully behind us, economic views
for the year ahead are widely divergent, both globally and locally, but the
most likely scenario is one of a protracted period of mild improvement in
activity," Investec economist Annabel Bishop says in her latest economic
overview.
"We expect growth of 2.5% in 2010 and 3.7% in 2011, with 2012 seeing a
move above 4.0%, both locally and globally. However, SA's economic
performance will be very heavily dependent on the resurgence of global
demand," she cautions.
"In SA the improvement in the PMI, which moved above 50 in November
last year implying an end to the contraction in activity, has yet to be
followed with a solid upturn in manufacturing production as in the US (the
manufacturing ISM rose to 55.9, its highest level since April 2006, on
rising orders and production).
"Much of the US improvement has been due to restocking after last
year's inventory rundown, and once this process is complete sustained demand
will be paramount to foster growth given US fiscal stimulus ($787bn) will
run dry over 2010.
"However, the Chinese economy expanded in December more rapidly than
at any time since the beginning of the global downturn (and this is likely
to continue over 2010 with growth averaging at least 10%). There is similar
news from other parts of Asia, cheering, and it will likely remain the
driver of growth in 2010," says Bishop.
On the demand side, she says, consumers, inundated with debt, are
anxious over earning prospects, which has resulted in an unusual degree of
thrift - and the demand side of the economy lagging the supply side.
"Companies are reluctant to employ until the economy proves to be in a
sustained upswing, while the fall in house prices has reduced spending
power. In addition, companies have become lean by necessity (producing more
with fewer individuals) and as this is an attractive businesses strategy it
will likely be maintained for as long as possible, at least until any
upswing proves sustainable.
"Few expect a double-dip global recession - where the economy expands
only to contract again. However, the biggest risk is for protracted,
stagnant growth (not our central forecast), similar to Japan's Lost Decade
in the 1990s that was caused by excessive real estate speculation. Most of
the gains in the US over the past three decades stemmed from investment in
real estate and consequently concern centres on the underlying growth
drivers, as its property sector has yet to recover - the US accounts for
over 20% of industrial production, China 11%, India 4%," adds Bishop.
- I-Net Bridge