The International Monetary Fund’s deputy director has breathed a sigh of relief on South Africa as the country faces growth challenges.
Speaking at the University of Cape Town on Thursday, David Lipton said he was optimistic that the future of the global economy lies with the emerging market and developing countries.
“This places South Africa in a very advantageous position, because you bridge these worlds. You are an emerging market country—a respected member of the G-20,” he said.
“But so much more needs to be done to emerge on the world stage as a source of growth and prosperity in a time of great hope for Africa. The challenge for South Africa is to position itself to take advantage of this bright future.”
Lipton said last year South Africa’s economy grew only 1.5 per cent meaning that per capita income did not rise at all.
“It also meant that the unemployment rate—among the highest in the G-20 countries—is still about one-quarter,” he added.
Lipton added that global growth over the past year had been weaker than hoped.
“Among the most important negative trends has been weak growth of emerging-market countries, which is having an impact across the world. For 2015, the IMF has slightly reduced its forecast for global growth to 3.5 percent, rising to 3.7 percent next year,” he said.
He said there many factors at work that contributed to this, not all of them economic, including geopolitical shockwaves from Ukraine and the Middle East adding that Africa in particular has felt the sharp decline in the oil price and other commodities.
Lipton said Europe continues to struggle, although growth was higher than expected at the end of 2014 and shows some signs of strengthening.
“Japan has experienced only modest growth. Among the emerging economies, China’s slower growth has had a significant impact on global demand; its growth is expected to moderate further in the coming year,” he said.
“There was good news from the U.S., where a rebound is gaining strength, supported by lower oil prices, more moderate fiscal adjustment than we saw over the past two years, and continued support from monetary policy. But this tells us that the advanced economies are diverging.”
He also said lower oil prices, while affecting different countries differently are, overall, good news for the global economy.
“Oil exporters—including those in Africa—are certainly feeling the pinch. But at the same time lower prices are giving a lift to oil consumers. This is reducing pressure on current accounts, budgets and inflation. This is the case for South Africa.”
Lipton said, overall, the risks in the global economy must be regarded with concern. Many of them are linked to financial market sentiment, which has compounded the vulnerabilities of oil exporters and the exposure of some countries to a rising dollar.
He added that there was reason to remain hopeful about Sub-Saharan Africa, which remains the second fastest-growing region after developing Asia.
“Even with the reduced demand for commodities and slower growth among the emerging markets, most countries in the region are expected to maintain high rates of growth in 2015. Growth in the region should remain at about 4 ¾ percent this year,” he remarked.
“This is important because Sub-Saharan Africa’s economic performance over the past 15 years has changed this continent’s outlook profoundly.”