Global recovery: SA well-placed

Johannesburg - South Africa is Africa's largest economy and for that very reason most affected by the sluggish global financial recovery, declares the International Monetary Fund (IMF) in a new report.

South Africa finds itself amid its first recession since 1992. Expectations are that the economy will contract 2.2% this year, with anticipated growth of 1.7% in 2010. This is far below the 5% growth rate the country experienced in the mid-2000s.

The IMF is, however, full of praise for South Africa's "careful fiscal management" and the way in which government's 1998 debt of 48% of the gross national product (GDP) shrank to just over 27% in 2007.

The Reserve Bank is also praised for the way in which it has relaxed monetary policy since 2008. "As economic activity has declined, inflation prospects have improved."

The IMF reckons that, unlike those in other countries, South Africa's markets behaved well while the international crisis intensified, and its banking institutions remain stable in 2009. This denotes the general vigour of the South African economy.

"The constrained manoeuvrability and high profitability of the South African banks, as well as their limited exposure to foreign assets and funding, have kept them liquid and well capitalised. This has obviated any need for government intervention."

The IMF believes South Africa is well placed to benefit from the early signs of an upturn in the global economy. But there is serious concern about the high levels of unemployment and government's slow progress with service delivery.

The IMF is also worried about the continuing "rigidity in the labour market, which restricts job creation in the medium term". With regard to the rest of Africa south of the Sahara, the IMF is cautiously optimistic about growth prospects.

But it is troubled about the outlook for three countries within the Southern African Development Community (SADC).

Botswana is one of the countries hardest hit, following the collapse of its diamond industry in the global recession. Angola has been equally affected by the sharp decline in the demand for oil. The IMF is also worried about the Seychelles because of the unprecedented fall-off in international tourism - the island group's chief source of income.

The IMF has singled out Nigeria's banking sector as a serious source of concern. Several banks in the oil-rich West African state are teetering on the brink of bankruptcy.

- Sake24.com

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