DTI: SA should ready for eurozone slowdown

2012-06-19 10:47

Johannesburg - South Africa needs to be better prepared should there be a deeper than expected recession in parts of its largest trading region of Europe, by developing and sustaining an industrial base which will help avoid the loss of hundreds of thousands of jobs and local economic decline, says Trade and Industry director-general Lionel October.

October told an economic policy dialogue on Monday night that SA had not been adequately prepared for the last financial crisis of 2008, which led to the loss of some 1 million jobs, mainly in the manufacturing sector.

"We need to be prepared if there will be either a serious downturn or stagnation (in the eurozone). We must have a coherent response this time so we don't suffer a knock as we did in the last round," October said.

Goolam Ballim, chief economist at Standard Bank, referred to recessions a "costly" for economies.

Parts of Europe are currently embroiled in high levels of indebtedness and economic uncertainty. A strong slowdown in economic activity in the eurozone could mean lower exports of locally manufactured goods, and thus weaker local growth.

Forecasts are already pencilling a 2.8% economic growth for SA in 2012, which is lower than the 3.1% the year before.

Most of the focus is on Greece, which has just emerged from elections and was on Monday still expected to form a government. It is, however, highly expected that the government will support bailouts and austerity measures.

October suggested that the reason why some parts of Europe were still economically sound, particularly Germany, while others including Greece and Spain were under economic strain, lay in the differences between these countries' levels of industrialisation, thus the call for an increased focus on SA's industrial capacity.