South Africa would be one of the economies in sub-Saharan Africa most vulnerable to capital outflows when the US Federal Reserve started tapering its monetary stimulus programme, the World Bank said yesterday.
“South Africa, which has strong links with global financial markets, is particularly vulnerable to capital flow movements, since debt-creating flows finance around 80 percent of the current account deficit,” the Washington-based lender said in its latest Africa’s Pulse report.
South Africa relies on short-term portfolio inflows to help finance the shortfall on its current account, which widened to 6.5 percent of gross domestic product in the second quarter from 5.8 percent in the first three months of the year.
Resource-rich economies in sub-Saharan Africa, particularly oil exporters, remained at risk to declines in commodity prices, the World Bank said. Many mineral-producing nations had made little progress in diversifying their economies and export performance had already been adversely affected by the drop in prices.
By value, exports from the region contracted 4.1 percent in the first half of 2013 from a year earlier, according to the World Bank’s commodity composite price indices. Agricultural goods declined 9 percent, metals and minerals dropped 8.8 percent and oil retreated 5.6 percent, it said.
“High dependence on one or a few commodities makes Africa’s resource-rich countries vulnerable to sharp movements in prices of these commodities,” Punam Chuhan-Pole, the lead economist of the World Bank’s Africa region and author of Africa’s Pulse, said in a statement. – Bloomberg