Sharper-than-expected slowdown in Europe could affect SA exports

SOUTH AFRICAN exports
to Europe could be hit by
recession in a number of the
major markets.
The European
Commission on Economic
and Financial Affairs says in
its September report that
economic growth is expected
to post 1.4% this year in the
European Union (1.3% in the
euro area) – around half a
percentage point less than
forecast in April.
“The main downside
risks identified in the spring
forecast have materialised,
with financial turmoil
deepening and reinforcing
the ongoing correction in
house prices, commodity
prices soaring and fuelling
inflation, and the slowdown
of global growth spreading
more widely,” says the report.
Inflation is expected to
average 3.8% in the EU and
3.6% in the euro area this
year “following the continued
strong rise in commodity
prices”.
"The continuation of
the turmoil in the financial
markets one year on, the
near doubling of energy
prices over the same period
and the correction in some
housing markets have had
an impact on the economy,
though the recent fall in
oil and other commodity
prices and the easing up in
the euro exchange rate have
provided some relief,” says
Joaquín Almunia, economic
and monetary affairs
commissioner.
Output has started to
fall in several advanced
economies in the second
quarter of this year. GDP
contracted by 0.1% in the
EU and by 0.2% in the
euro area.
For 2008, the
Commission’s Economic and
Financial Affairs Directorate
General now forecasts
growth at 1.4% in the EU
and 1.3% in the euro area.
This is calculated on the
basis of updated projections
for France, Germany, Italy,
the Netherlands, Poland,
Spain and the United
Kingdom, that together
account for about 80% of
the EU’s GDP.