The document discusses the pressures facing the global economy and their implications for South Africa. It provides data showing slowing growth and rising debt in developed economies like Europe and the US. It also notes signs of slowing growth in emerging markets like China. This weak external environment poses challenges for South Africa's economy. However, some domestic factors such as strong growth in household deposits and rebounds in employment and the stock market could help support South Africa.

1. World economy under pressure:
implications for South Africa
Kevin Lings
Economist
STANLIB

2. Euro-area GDP index (real)
Index Q1 2006 = 100
108
107
106
105
104
103
102
101
100
99
2006
2007
2008
2009
2010
2011
2012

3. Germany, France and Italy GDP growth
%y/y
6.0
5.0
4.0
Germany
3.0 France
2.0
1.0
0.0
-1.0
-2.0
Italy
-3.0
-4.0
-5.0
-6.0
-7.0
-8.0
2006 2007 2008 2009 2010 2011 2012

4. Euro-area economic sentiment
Index
120
Germany
110
100
France
90
Spain
Italy
80
Greece
70
05
06
07
08
09
10
11
12

5. Euro-area unemployment rate
%
11.5
11.0
10.5 Euro-area
10.0
9.5
9.0
8.5
8.0
7.5
7.0
04 05 06 07 08 09 10 11 12

6. Euro-area government debt as % of GDP
%
175
150
125
100
75
50
Spain
Italy
Germany
Euro-area
Ireland
Portugal
France
Greece

7. Italy 2-year government bond yield
%, yield, daily
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
2010
2011
2012

8. Spain 2-year government bond yield
%, yield, daily
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
2010
2011
2012

9. Government expenditure as % of GDP
Europe
France 56.3
Denmark 56.0
Belgium 53.5
Italy 50.0
Emerging markets 28.5
Netherlands 50.0
Greece 49.7
Portugal 48.7
Germany 45.6
Spain 43.6
Euro-area 49.4

10. US GDP
$ trillion, constant prices
13.6
13.5
13.4
13.3
13.2
13.1
13.0
12.9
12.8
12.7
12.6
12.5
2006
2007
2008
2009
2010
2011
2012

11. US real GDP growth
%q/q
6
4
2
0
-2
-4
-6
-8
-10
2004
2005
2006
2007
2008
2009
2010
2011
2012

12. 2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
US leading indicator
1993
1992
1991
1990
1989
1988
1987
12
10
8
6
4
2
0
-2
-4
-6
-8
-10
-12
-14
-16
-18
-20
%y/y

13. US retail sales
%y/y, nominal
10
8
6 US retail sales
4 3-month ave
2
0
-2
-4
-6
-8
-10
-12
06
07
08
09
10
11
12

14. US consumer confidence
Index
160
140
120
100
80
60
40
20
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

15. US fiscal cliff at end 2012
Tax benefits that are set to expire end 2012 $bn
Bush tax cuts, middle income earners 182
Bush tax cuts, high income earners 56
Unemployment insurance 34
Payroll tax cut 109
Alternative Minimum Tax 132
Affordable Care Act 27
Total 540
Debt ceiling debacle will result in automatic spending cut-backs

16. US house prices
US House prices,%, m/m, nominal, S&P Case Shiller
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
06 07 08 09 10 11 12

17. US housing starts
Thousands, sa
2250
2150
2050 Housing starts
1950
1850
1750
1650
1550
1450
1350
1250
1150
1050
950
850
750
650
550
450
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

18. China growth in GDP and industrial production
%y/y %y/y
GDP (lhs)
Industrial production (rhs)

19. China exports
% y/y, 3mnth ave
50
40
30
20
10
0
-10
-20
-30
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

20. China growth in bank loans
%y/y
35
32
29
26
23
20
17
14
11
8
5
2006
2007
2008
2009
2010
2011
2012

21. US and Euro-area consumer inflation
%
4.0
US
3.5
3.0
2.5
Euro-area
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
2009 2010 2011 2012

22. China, Brazil, Russia consumer inflation
%
16.0
14.0
12.0
10.0
Russia
8.0 Brazil
6.0
4.0
China
2.0
0.0
-2.0
2009 2010 2011 2012

23. South Africa consumer inflation
% y/y
14
12
10
8
6
4
2
0
2006 2007 2008 2009 2010 2011 2012

24. Global consumer inflation rate
%y/y %y/y

25. 2012
2011
2010
2009
2008
2007
2006
2005
2004
US corn price (Chicago)
2003
2002
2001
$ per bushel
2000
9
8
7
6
5
4
3
2
1

26. Global interest rates
% %
Emerging markets (rhs)
Developed markets (lhs)

27. US real interest rates
Percentage points (Fed funds rate less core consumer inflation)
4.5
3.5
2.5
1.5
0.5
-0.5
-1.5
-2.5
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

28. South Africa real interest rates
Percentage points (Repo rates less consumer inflation)
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
06 07 08 09 10 11 12

29. South Africa household deposits
R billion
465
455
445
435
+R74bn
425
415
405
395
385
375
2010
2011
2012

30. South Africa growth in household deposits
%y/y
13
12
11
10
9
8
7
6
5
4
3
2011
F
M
A
M
J
J
A
S
O
N
D
2012
F
M
A
M

31. SA GDP back well above previous highs
Rand billion, constant prices
1950
1900
1850
1800
1750
1700
1650
1600
2006
2007
2008
2009
2010
2011
2012

32. Q2 2012
Q1 2012
Still 580 000 below the previous peak
Q4 2011
Q3 2011
Q2 2011
Q1 2011
Q4 2010
Q3 2010
Q2 2010
Q1 2010
Q4 2009
Q3 2009
Q2 2009
SA total employment
Q1 2009
Q4 2008
Q3 2008
Q2 2008
Million Q1 2008
14.2
14.0
13.8
13.6
13.4
13.2
13.0
12.8

33. SA non-financial corporate deposits
R billion
550
500
450
400
350
300
250
2006
2007
2008
2009
2010
2011
2012

34. South Africa equity market index
Index, daily
37000
35000
33000
31000
29000
27000
+95%
25000
23000
21000
19000
17000
2006
2007
2008
2009
2010
2011
2012

35. 30
55
80
105
130
155
Greece %
Italy
Ireland
Portugal
US
Government debt as % of GDP
Euro-area
Spain
UK
France
Germany
South Africa

36. Net foreign purchases of South African bonds
R billion, cumulative
220
200 +R156bn
180
160
140
120 Bonds
100
80
60
40
20
0
-20
2004
2005
2006
2007
2008
2009
2010
2011
2012

37. South Africa 10-year government bond yield
%, yield, daily
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
2010
2011
2012

38. US Federal Reserve quantitative easing
$ billion
2200
2050
1900
1750
1600
1450
1300
1150
1000
850
700
550
400
250
100
-50
2008
2009
2010
2011
2012

39. US 10-year government bond yield
%, yield, daily
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
2010
2011
2012

40. US corporate cash on balance
% of GDP
9.8
9.5
9.3
9.0
8.8
8.5
8.3
8.0
7.8
7.5
7.3
7.0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

41. US S&P 500 equity index
Index, daily
1700
1600
1500
1400
1300
1200
1100
1000
900 +107%
800
700
600
2006
2007
2008
2009
2010
2011
2012

42. SA leading indicator
%y/y
25
20
SA leading indicator, %y/y
15
10
5
0
-5
-10
-15
-20
2006
2007
2008
2009
2010
2011
2012

43. SA consumer spending vs disposable income
%, q/q, 4-quarter moving avearge, real
10
9
Consumer spending
8
Consumer income
7
6
5
4
3
2
1
0
-1
-2
-3
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

44. SA exports to Europe
R billion, 6-month moving average
16.5
15.5
14.5
13.5
12.5
11.5
2009
2010
2011
2012

45. Government revenue and expenditure as % of GDP
%
35
34 Fiscal years
33
32
31
Expenditure as % of GDP
30
29
28
27
26
Revenue as % of GDP
25
24
05/06
06/07
07/08
08/09
09/10
10/11
11/12
12/13
13/14
14/15

46. Government salary payments
Billions
400
+6.4% per annum
360
320
+16.0% per annum
280
240
200
160
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15

47. Increase in the spending on social grants
%y/y
13
12
11
10
9
8
7
6
5
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15

48. Public sector infrastructural spending
Rbn R844.5bn
350
Public sector only spent 68% of budget
300
250
200
150 284.6 297.6
262.3
226.6
100 193.0 203.6
177.8
130.2
50 83.6
70.7
0
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15

49. World corruption perception index: South Africa
World ranking
65
60
55
50
45
40
2005
2006
2007
2008
2009
2010
2011

50. Transnet capital expenditure
(R300bn over 7yrs)
Rbn Create 588 000 direct and in-direct job opportunities
60
55
50
45
40
35
30
25
20
15
10
5
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

51. Transnet capacity creation projects
● Iron ore export railway line expansion to 82.5m tons, up from 43m
● Coal railway line expansion to 97.5m tons, up from 65m
● Increase export manganese exports to 12m tons from 5m tons
● General rail freight capacity from 79.7m tons to 170.2m tons
● Container terminal at Coega
● Cape Town container port expansion
● Durban container port terminal berth deepening
● Transnet multi purpose product pipeline

52. SA non-financial corporate deposits
R billion
550
500
450
400
350
300
250
2006
2007
2008
2009
2010
2011
2012

53. Thank you