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The IDC has released a report looking at SA’s economic overview. According to the report, the world economy has been exhibiting signs of increased weakness as the unresolved sovereign debt quagmire in the Eurozone takes a toll on business and consumer confidence. In the euro area, recessionary conditions are becoming more pronounced on its periphery, whilst growth rates are being taken to negligible levels at the core. The economic performances of several emerging economies are turning out to be significantly more modest than previously anticipated, affected by weaker external and local demand.
“The Eurozone is an important export market for many economies, consuming more than 34% of Russia’s merchandise exports, around 14% of China’s, almost 18% of Brazil’s, close to 17% of South Africa’s and just over 13% of the United States’ merchandise export basket. Should the detrimental effect on trading patterns intensify, the BRICS economies most affected are likely to be Russia, South Africa and China, due to the relative importance of Eurozone demand for their gross domestic production,” says the report.
“A contraction in Eurozone demand for South Africa’s merchandise exports has a substantially negative direct effect on the domestic economy. Should export sales to this region be 5% lower relative to 2011 figures, The IDC’s macroeconomic impact analysis estimates a reduction in GDP growth in order of 0.2 of a percentage point, a 0.4% contraction in manufacturing value add and possibly 18 700 jobs being lost across various sectors of the domestic economy.
Very challenging trading conditions in several advanced economies may prolong the difficulties being experienced by export-oriented manufacturing enterprises and agricultural producers, whilst the worse-than-anticipated slowdown in key emerging markets such as China and India will place commodities’ exporters are under increasing strain. The likelihood of the Eurozone facing a prolonged period of stagnation, should not be underestimated.”