banner_9.jpg
banner_274.jpg
Home » News » Business » Global output to increase

Global output to increase

Publishing Date : 04 September, 2017

Author :

Global output is forecast to increase by 3.5 percent in 2017 and by 3.6 percent in 2018, higher than the growth of 3.2 percent in 2016, while output growth for major economies is projected at 2 percent in 2017, slightly higher than the 1.7 percent in 2016.


In EMDEs, growth is expected to increase from 4.3 percent in 2016 to 4.6 percent in 2017, against the background of modest global demand and higher commodity prices.11 However, there are downside risks to global economic activity, including the prevailing policy uncertainty in the USA, as well as the emerging tendency towards protectionism, geopolitical tensions and persistence of tight financing conditions in some key markets.


In South Africa, GDP is forecast to grow by 1 percent in 2017 (from 0.8 percent previously forecast) compared to 0.3 percent in 2016. The South African economic prospects continue to be constrained by structural challenges, uncertainty and weak business sentiments. The downgrade of South Africa’s foreign debt to subinvestment grade (by Standard and Poor’s and Fitch) and prospects for further downgrade by the rating agencies weigh down on public sector investment through higher borrowing costs and difficulty in accessing funding.


It is expected that inflationary pressures will remain restrained, reflecting stable commodity prices and modest growth in global economic activity. Therefore, global inflation is projected to average 3.5 percent in 2017, higher than the 2.8 percent in 2016. Overall, it is expected that foreign price developments will have a benign influence on domestic inflation. In particular, it is anticipated that inflation for trading partner countries will average 4 percent in 2017, mostly reflecting higher inflation in South Africa, where headline inflation is forecast to average 6.2 percent12 in 2017, and to be within the 3 – 6 percent target range for the remainder of the year. Nonetheless, it is envisaged that the relative strength of the Pula against the South African rand will moderate imported inflation.


Domestic non-mining output expansion is projected to remain below trend in the medium term, influenced mainly by the restrained growth in personal incomes, moderate increase in government expenditure and modest economic growth in major trading partners. However, gradual recovery is expected in the medium term in response to the loose monetary conditions. Overall, inflation is forecast to breach the lower bound of the 3 – 6 percent objective range in the medium term.


Upside risks to the inflation outlook relate to any considerable upward adjustment in administered prices and government levies and/or taxes and any increase in international oil prices beyond current forecasts, as well as any significant upward deviation in regional food prices from international trends. Nevertheless, there are downside risks associated with restrained global economic activity and the potential fall in commodity prices.


It is projected that monetary conditions will continue to be accommodative in the short to medium term, largely on account of negative real interest rates. The accommodative monetary policy stance is supportive of growth in economic activity going forward. Even then, structural constraints, possible instability in the supply of inputs and utilities,14 as well as external and weather shocks could have adverse impact on growth.


The current state of the economy and the projected performance as well as the prospects for the financial sector, along with the positive inflation outlook, suggest that maintaining an accommodative monetary policy stance is consistent with keeping inflation within the 3 – 6 percent objective range in the medium term. Furthermore, the potential for banks to expand credit provision continues to be supported by a stable financial system and sufficient liquidity in the banking system (Charts 11-13). In particular, the level of Bank of Botswana Certificates and balances held by banks abroad, in part, represent excess liquidity, which is available for lending in response to any effective credit demand by both businesses and households.

Cartoon

Polls

Do you think the closure of BCL will compel SPEDU to double their efforts in creating job opportunities in the Selibe Phikwe?

banner_14.jpg
banner_12.jpg

POPULER BRANDS