The World Bank expects South Africa’s growth rate to recover to 3.5% in 2011, on the back of continued consumer spending and a recovery in private investment spending, which contracted sharply during the recent period of global economic crisis.

However, its June 2011 ‘Global Economic Prospects’ (GEP) report shows a material decoupling of South Africa from the rest of the region, where the rate of economic expansion is expected to be 5.1% this year – or 5.9% if South Africa’s relatively “tepid” performance were to be excluded from the figures.

The report notes that growth in Africa’s largest economy is also only expected to return to its precrisis average from 2012, when the economy is expected to expand by 4.1%, followed by growth of 4.4% in 2013.

By contrast sub-Saharan Africa – which includes high-growth performers such as the oil-rich Republic of Congo, which expanded by 9.1% in 2010, as well as poor performers such as tiny Comoros, which grew by only 1.7% last year – has recovered relatively quicker at 4.8%, when compared with South Africa’s 2010 performance of 2.8%.

Gross domestic product (GDP) growth in sub-Saharan Africa is also expected to remain strong reaching 5.8% in 2012. Excluding South Africa, GDP growth in sub-Saharan Africa is expected to grow by between 5.9% and 6.6% over the medium term, one of highest regional growth prospects globally.

The GEP figures for South Africa are broadly in line with those of the National Treasury, which forecast in February that the domestic economy would expand by 3.4% in 2011, 4.1% in 2012 and by 4.4% in 2013.

But the figures are also indicative that the bank’s has low expectations of South Africa’s ability to repeat its strong first-quarter showing, when the economy expanded at 4.8%, on the back of a recovery in the manufacturing sector.

Nevertheless, growth prospects for South Africa are improving along with the global recovery, which the GEP’s lead author Andrew Burns has described as broad-based, despite continuing risks associated with fiscal imbalances in Europe and natural and political turmoil in Asia, the Middle East and North Africa.

RISKS REMAIN

Burns says serious contagion from the uprisings in countries such as Tunisia and Egypt is unlikely and that even the expected post-disaster contraction of the Japanese economy is unlikely to have a major spill-over effect.

However, the bank acknowledges that there are still serious risks associated with possible supply-side disruptions to oil as a result of the political upheavals and warns that a $50/bl rise in the oil price from March levels could lop 0.7% off the anticipated growth rates of developing countries.

Equally domestic food price increases in Africa are a concern and much will hinge on climatic conditions during the year – Africa did not experience the effects of the big rise in international food prices in 2010, owing to bumper crops in a number of countries and a different pricing dynamic for domestic staple products when compared with traded agricultural products.

There is also some transmission mechanism threat associated with the European debt crisis, which in the worst case scenario could lower growth rates in Africa by as much as 1.5%.

But the outlook for the continent is generally positive, with senior economist Alain Dennis pointing to both external and internal drivers for this assessment, including the rise in demand for and prices of commodities.

However, Dennis also stresses that resources-rich countries were not the only strong growth performers in 2010, with countries such as Ethiopia and Rwanda both growing by more than 7% in 2010.

He says the consistent growth over the past decade has resulted in a rise in discretionary income, which is being translated into an increase in the demand for imported goods and retail, financial and communications services.

In South Africa the outlook is also buoyed by a likely increase in business spending, which should help increase employment. The country shed about one-million jobs during the global crisis, resulting in its official unemployment rate rising to about 25% from around 22% ahead of the 2009 recession.

Finance Minister Pravin Gordhan has acknowledged in an address to lawmakers that the country faces a serious unemployment challenge, particularly amongst our young people. He has, therefore, unveiled a new R9-billion ‘Jobs Fund’ to support enterprise development, infrastructure investment, work seekers, and to overcome institutional barriers to job creation.

The GEP argues that South Africa’s countercyclical fiscal policy should continue to boost growth from increased government spending in 2011, but is likely to wane thereafter.

“With South Africa’s economy well integrated into the global economy the on going global recovery should continue to provide support to South Africa’s export growth, though strengthening domestic demand will increase imports, which will moderate the contribution of net exports to GDP,” the bank says.

It notes, too, that consumer spending, which has been buoyed by an “accommodative” monetary policy, is also likely to continue.