File photo: Yuri Gripas.
File photo: Yuri Gripas.

Gloomy outlook for world economy

By Thebe Mabanga Time of article published Apr 14, 2015

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Johannesburg – The International Monetary Fund (IMF) is set to warn of continued gloomy times ahead when it releases its World Economic Outlook on Tuesday, with only the United States showing significant sustained growth, while China continues to slow, Europe stutters along and Africa’s positive growth from a low base not sufficient to counter weak growth elsewhere.

China’s slowdown was reinforced on Monday by the release of its weak trade data, which dragged down major commodity currencies, including the Australian dollar and the rand, as those economies depend on Chinese imports of commodities. Other parts of Asia, such as Japan and India, continue to grow but at an inadequate and stuttering pace.

The United Sates offers the only glimmer of hope for the world economy, with growth forecast at 2,5% and until last month, produced stronger than expected jobs numbers and now the only question on everyone’s lips is when and by how much they are likely to raise interest rates. This was now expected to be during the second half of this year.

RECESSION AFTERMATH

In many ways, the world economy is still reeling from the aftermath of the 2008 global financial crisis, and no region epitomises this more than Europe. The debt crisis that gripped the continent in the wake of the recession still casts a shadow, with Greece debt troubles not fully resolved and Russia now expected to slip back into a recession. Austerity measures remain a feature of life in Europe, with the upcoming British election set be decided by which party can best slash debt and keep the economy going.

South Africa’s growth prospects remained constrained by threats of strike action and the reliability of power supply by Eskom, but power constraints are a feature in much of developing world, with Turkey and India, Nigeria and much of the African continent as well as Brazil also plagued by frequent outages.

The IMF is likely to continue to advocate stimulus measures such as infrastructure spending, reigning in public spending including government wage bills and reduction of deficits as the remedy for the world’s ills. The world’s consumers are currently having a respite due to falling food prices, dragged down by sugar prices.

But South African consumers will not be as lucky as drought during the first quarter has pushed up prices of maize and the recent breather offered by oil prices in the last quarter of last year has all but evaporated.

ANA

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