SOUTH Africa’s economic outlook in 2022 is murkier than it was just a month ago due to the deterioration in global economic prospects from the war between Russia and Ukraine, professional services and accounting firm PwC warned.
Russia’s “special military operation” in Ukraine, which entered its second month last week, was disrupting global supply chains, causing food and fuel inflation to worsen, and affecting global economic growth.
Recent economic indicators showed global gross domestic product (GDP) growth could be more than one percentage point lower this year than previously projected.
In its report released Monday, PwC said South Africa faced a weaker economic outlook as global growth slows and load-shedding increases.
PwC chief economist Lullu Krugel said South Africa’s industry-specific exposure to trade with Ukraine and Russia included almost a quarter of the country’s total wheat imports.
Earlier this month, Ukraine banned the export of wheat, corn and sunflowers, meaning the price of these soft commodities would continue to escalate in the coming months, said Krugel.
Krugel said the downside scenario of higher inflation, weaker external demand and elevated levels of load-shedding was now much more likely to materialise.
“When taking into account the final GDP data for 2021, as well as the deteriorated global economic outlook over the past month, we now forecast a real GDP growth rate of 2 percent this year from 2.3 percent previously, with continued downside risk,” Krugel said.
“Unreliable power supply remains the country’s largest growth inhibitor. We estimate that load-shedding reduced real GDP growth by three percentage points last year.”
PwC’s GDP projection is in line with the SA Reserve Bank’s forecast which also estimated 2 percent growth.
Krugel said alongside this weaker economic outlook was even greater concern about the speed of the country’s jobs recovery.
“There is little scope for South Africa’s unemployment rate to improve or decline this year if local business sentiment is weighed down by these international factors,” she said.
“Furthermore, as economic growth moderates back towards 1.5 percent over the long term, the unemployment rate is likely to continue higher. A higher long-term average growth rate is needed to arrest this continued deterioration.”
PwC is of the view that a substantial and sustainable increase in economic and jobs growth is only possible if South Africa can improve on three key growth constraints: electricity reliability, workforce skills, and private sector investment.
Meanwhile, the Grain Handling Organisation of Southern Africa (Gosa) yesterday said food security should be declared a national asset
Gosa president Hein Rehr said South Africa may not experience any food shortages in the short term due to surplus imports, but the crisis was sure to have an impact on food price inflation as prices were already rising worldwide.
“The government of the day should classify food security – just like Eskom – as a national asset,” Rehr said.