Warnings of rocky economic road ahead

There will be further pressure on rates and all companies involved in the logistics chain if analysts are right about a “double dip” world recession. Locally, a weakened global economy and dampening of consumer and business confidence are triggering a slowdown in South Africa’s growth momentum. A new World Bank report – South Africa Economic Update: Focus on Inequality of Opportunity – forecasts a lowered growth rate of 2.5% for 2012, lower than the bank’s November 11 estimate of 3.1%. The South African Reserve Bank has put growth at 2.7% – down from its 2.9% estimate in May. “South Africa is highly integrated with the global economy, and is therefore susceptible to the ongoing slowdown in the Eurozone countries and China, the two principal export destinations for its goods and services,” said Asad Alam, World Bank country director for South Africa, at the press launch of the report. The outlook for the United States is also bad, according to Nouriel Roubini, one of a handful of analysts who predicted the 2008 financial crisis. “In 2013, the US economy will be hit with a double whammy: the direct effects of a fiscal drag via lower government consumption, and the indirect effect on private spending via higher taxes and lower transfers,” he says. Roubini warns that a “perfect storm” of the fiscal problems in the US, a slowdown in China, European debt restructuring and stagnation in Japan may converge on the global economy. He has, however, also been wrong – his warning in July 2010 of weakening economic growth was followed by a global upswing. Concern about the global economy is behind the July prime rate reduction of 0.5%. Announcing the drop, Reserve Bank governor Gill Marcus said growth could fall below the forecast 2.7%. “Given the possibility of a more widespread global downturn, the risks to this forecast are seen to be on the downside, with the external impact coming through trade links and commodity prices,” she said. Slower growth could lead to social and political instability in South Africa, warns the World Bank. “South Africa’s weak performance on providing employment opportunities is hampered not only by slow job creation but also by a highly unequal access to the limited number of opportunities.” INSERT: ‘Concern about the global economy is behind the July prime rate reduction of 0.5%.’