Economic outlook 12 March 2014 Analyst certifications and important disclosures are in the disclosure appendix. For other important disclosures, please refer to the disclosure & disclaimer at the end of this document
Contents 1 Section Page 1. The global backdrop 2 2. South African economy: 6 3. : malaise to persist 51
Source : Standard Bank Library Private and confidential The global backdrop
Global growth 3 North America 2.2 (2.1) Western Europe 0.6 (-0.4) Eastern Europe 2.5 (2.3) Middle East/North Africa 3.4 (2.3) Japan 1.1 (1.9) Key: Per cent 0-1.9 2-2.9 3-3.9 4-4.9 5 and above * 2013 growth in brackets Sources: IMF, SBR Latin America 3.0 (2.7) Sub-Saharan Africa 5.8 (5.0) Asia (excl Japan ) 6.3 (6.3)
4 SA economy slow recovery in relation to other EMs & SSA 7 6 % y/y 5 4 3 2 1 0 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 Global Advanced economies Developing economies Sub-Saharan Africa South Africa GDP Sources: IMF, SBR
The great decoupling came to nought 5 Emerging Markets not immune to Developed Markets fate 10 8 % y/y 6 4 2 0-2 -4-6 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Global GDP growth Advanced economies Emerging economies Source : The Economist Source : IMF
Private and confidential SOUTH AFRICA
Fiscal Deficit as % of GDP (2013 est) 7 The worry of twin deficits -8-6 -4-2 0 2 4 6 0 Russia Turkey -1 Strong Indonesia Brazil Mexico -2 Romania Czech Republic -3 Hungary Philippines SA Poland -4 Israel Malaysia Ukraine Serbia India Vulnerable -5-6 -7 Current Account as % of GDP (2013 est) -8 Sources: Bloomberg, SBR
8 SA demand drivers 120 Q2:09 = 100 115 110 105 100 95 90 2009 2010 2011 2012 2013 Households consumption expenditure Government consumption expenditure Gross fixed capital formation Sources: SARB, SBR
9 SA consumer finances 14 Annual rate/ % 12 10 8 6 4 2 0-2 -4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Real household income Households: Credit share in total spending Sources: SARB, SBR
10 Consumer spending by type Q2:09 = 100 170 160 150 140 130 120 110 100 90 2009 2010 2010 2011 2012 Durables Semi-durable Non-durables Services Sources: SARB, SBR
11 Capital spending by type 180 Q2:09 = 100 160 140 120 100 80 60 2009 2010 2011 2012 2013 Residential buildings Construction works Non-residential buildings Transport equipment Machinery and other equipment Sources: SARB, SBR
12 Foreign trade 150 Q2:09 = 100 140 130 120 110 100 90 2009 2010 2011 2012 2013 Exports of goods and services Imports of goods and services Sources: SARB, SBR
13 Higher inflation and interest rate profile expected in 2014 % 18 15 12 9 6 3 0 2006 2008 2010 2012 2014 CPI Prime rate Upper target Lower target Sources: SARB, SBR
Private and confidential SA trade
15 SA s bi-directional trade Source: SARB
16 SA s exports to the world (2000 figures in parentheses) Sources: Quantec, SBR
SA exports to the world 17 Exports to the world 80 % y/y 60 40 20 0-20 -40 1993 1997 2001 2005 2009 2013 Total 6 per. Mov. Avg. (Total) Commodity exports 12 mma % y/y 100 80 60 40 20 0-20 12mma % y/y -40 2000 2002 2004 2006 2008 2010 2012 Mineral products Machinery & mechanical appliances Vehicles, aircraft & vessels Precious & semi-precious metals & stones Base metals Commodity exports - 2000 Commodity exports - 2013 Sources: Quantec, SBR Pulp of wood 3% Vegetable product 3% Prepared foodstuffs, beverages & tobacco 5% Chemical products 7% Textiles Vehicles, aircraft & vessels 9% Machinery & mechanical appliances 10% Other 8% Precious & semiprecious metals & stones 23% Base metals 1 Mineral products 16% Prepared foodstuffs, beverages & tobacco 3% Machinery & mechanical appliances 8% Vehicles, aircraft & vessels 10% Vegetable product Chemical products 6% Plastics & rubber Base metals 13% Pulp of wood Other Mineral products 26% Precious & semi-precious metals & stones 2
18 SA s imports from the world (2000 figures in parentheses) Asia 46% (36%) Europe 30% (43%) Africa 1 () Americas 10% (15%) Oceania (3%) Sources: Quantec, SBR
SA imports from the world 19 Imports from the world 80 % y/y 60 40 20 0-20 -40-60 1993 1997 2001 2005 2009 2013 Total 6 per. Mov. Avg. (Total) Commodity imports 100 80 60 40 20 0-20 12mma % y/y -40 2000 2002 2004 2006 2008 2010 2012 Mineral products Machinery & mechanical appliances Vehicles, aircraft & vessels Chemical products Commodity imports - 2000 Commodity imports - 2013 Sources: Quantec, SBR Optical & photographic equipment Plastics & rubber Base metals Precious & semiprecious metals & stones 3% Textiles 3% Special classification of original equipment Vehicles, aircraft 8% & vessels 8% Other 1 Chemical products 11% Machinery & mechanical appliances 28% Mineral products 15% Vehicles, aircraft & vessels 10% Prepared foodstuffs, beverages & tobacco 3% Plastics & rubber Base metals 5% Original eqipment 6% Textiles 3% Chemical products 9% Optical & photographic equipment Other 11% Machinery & mechanical appliances 2 Mineral products 23%
Private and confidential Trade: The Americas
21 GDP US and Canada Canada 2. Key: Per cent 0-1.9 2-2.9 3-3.9 4-4.9 5 and above US 2.6% Sources: IMF, SBR
22 GDP Latin America and the Caribbean Key: Per cent 0-1.9 2-2.9 3-3.9 4-4.9 5 and above Sources: IMF, SBR
Trade deficit with the Americas likely to persist Trade balance with the Americas- Rbn Exports to and imports from the Americas - % y/y 23 5 Rbn 90 % y/y 70 0 50-5 30 10-10 -10-15 -30-20 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012-50 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Americas Exports Imports Sources: Quantec, SBR
Export growth pedestrian 24 Exports to the Americas - 2000 Exports to the Americas - 2013 Oceania Americas 1 Not allocated 15% Asia 23% Europe 23% Africa 18% Not allocated 11% Americas 1 Oceania 1% United States 75.8% Canada 3.9% Brazil 7.8% Mexico 5.6% Africa 13% Europe 33% Asia 35% Argentina 2. Other 4.7% Sources: Quantec, SBR
US the major recipient of exports to the Americas 25 Imports from the Americas - 2000 Imports from the Americas - 2013 Oceania 3% Not allocated 1% Oceania Africa Americas 15% Asia 36% Europe 30% Africa 1 Not allocated 0% United States 61.8% Americas 10% Brazil 13.7% Mexico 6.1% Argentina 8.5% Europe 43% Asia 46% Canada 5.9% Other 4.0% Sources: Quantec, SBR
American demand for vehicles climbs 26 Export commodities - 2000 Export commodities - 2013 The global backdrop SA: slow the new normal? Optical & photographic equipment Miscellaneous manufactured articles 6% Arms & ammunition 1% 5% Works of art Footwear & headgear 1% Animal or vegetable fats & oils 0% Special classification of original equipment 0% Prepared foodstuffs, beverages, tobacco Plastics and rubber Vegetable products 5% Optical and photographic equipment Other Wood products 10% Raw hides & skins, leather 10% Stone, plaster & cement 11% Animal products 11% Vegetable product 26% Plastics & rubber 15% Machinery & mechanical appliances 9% Chemical products 10% Mineral products 11% Base metals 16% Vehicles, aircraft & vessels 2 Precious and semi precious metals and stones 17% Sources: Quantec, SBR
Imports dominated by machinery 27 Import commodities - 2000 Imports commodities - 2013 Pulp of wood 3% Other 1 Prepared foodstuffs, beverages & tobacco Plastics & rubber Base metals Machinery & mechanical appliances 3 Vegetable product Original equipment 5% Base metals 3% Plastics & rubber Mineral products 5% Other 9% Machinery & mechanical appliances 29% Vegetable product Mineral products Optical & photographic equipment 7% Vehicles, aircraft & vessels 1 Chemical products 1 Optical & photographic equipment 5% Prepared foodstuffs, beverages & tobacco 7% Chemical products 11% Vehicles, aircraft & vessels 18% Sources: Quantec, SBR
Private and confidential Trade: Europe
29 GDP Europe Key: Per cent 0-0.9 1-1.9 2-2.9 3-3.9 4-4.9 5 and above Sources: IMF, SBR
Trade balance deep in deficit 30 Trade balance with Europe- Rbn Exports to and imports from Europe- % y/y 0 Rbn 50 % y/y -10 40-20 30-30 -40 20-50 10-60 0-70 -10-80 -90-20 -100 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012-30 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Europe Exports Imports Sources: Quantec, SBR
Exports to Europe decline over the years 31 Exports to the Americas - 2000 Exports to the Americas - 2013 Oceania Not allocated 15% Asia 23% Americas 1 Not allocated 11% Oceania 1% Germany 23.3% Americas 1 Africa 18% Europe 23% UK 16. Netherlands 15.1% Belgium 9% Switzerland 8.7% Africa 13% Europe 33% Asia 35% Other 27.6% Sources: Quantec, SBR
Imports follow trend 32 Imports from the Americas - 2000 Imports from the Americas - 2013 Oceania 3% Not allocated 1% Not allocated 0% Oceania Africa Americas 15% Asia 36% Africa 1 Americas 10% Germany 33.7% UK 11.5% Europe 30% Italy 8. France 7.8% Netherlands 5.9% Europe 43% Asia 46% Other 32.6% Sources: Quantec, SBR
Europe s demand for minerals improves 33 Export commodities - 2000 Export commodities - 2013 Prepared foodstuffs, beverages & tobacco Chemical products Miscellaneous manufactured articles Other 1 Vegetable product 6% Machinery & mechanical appliances 8% Other unclassified goods 10% Precious & semiprecious metals & stones 15% Base metals 11% Mineral products 1 Vehicles, aircraft & vessels 1 Chemical products Wood products 1% Prepared foodstuffs, beverages, tobacco Vegetable products 7% Machinery & mechanical appliances 11% Base metals 11% Plastics and rubber 1% Other 5% Vehicles, aircraft and vessels 13% Precious and semi precious metals and stones 23% Mineral products 20% Sources: Quantec, SBR
SA demand for machinery on the backfoot 34 Import commodities - 2000 Imports commodities - 2013 Stone, plaster & cement Pulp of wood 3% Optical & photographic equipment Base metals Precious & semiprecious metals & stones Plastics & rubber 5% Other 9% Vehicles, aircraft & vessels 8% Original equipment 9% Chemical products 1 Machinery & mechanical appliances 38% Pulp of wood 3% Prepared foodstuffs, beverages & tobacco 3% Optical & photographic equipment Mineral products Plastics & rubber Base metals 5% Original equipment 10% Other 9% Chemical products 1 Machinery & mechanical appliances 29% Vehicles, aircraft & vessels 15% Sources: Quantec, SBR
Private and confidential Trade: Asia
36 GDP Asia Key: Per cent 0-1.9 2-2.9 3-3.9 4-4.9 5 and above Sources: IMF, SBR
SA-Asia trade: deficit grows 37 Trade balance with Europe- Rbn Exports to and imports from Europe- % y/y 0 Rbn 50 % y/y -20 40-40 30 20-60 10-80 0-100 -10-120 -20-140 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012-30 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Asia Exports Imports Sources: Quantec, SBR
Improved ties with Asia 38 Exports to the Americas - 2000 Exports to the Americas - 2013 Oceania Not allocated 15% Asia 23% Americas 1 Not allocated 11% Oceania 1% China 33.1% Americas 1 Africa 18% Asia 35% Japan 18.1% India 12.3% Korea 5.5% Other 26. Africa 13% Europe 33% Europe 23% Hong Kong 4.8% Sources: Quantec, SBR
bi-directional relational strengthens 39 Imports from the Americas - 2000 Imports from the Americas - 2013 Oceania 3% Not allocated 1% Oceania Not allocated 0% Africa Americas 15% Asia 36% Africa 1 Americas 10% China 31.1% Asia 46% S. Arabia 17. Japan 9.5% India 9. Thailand 5.8% Europe 43% Europe 30% Other 25.8% Sources: Quantec, SBR
Exports of minerals more than doubles 40 Export commodities - 2000 Export commodities - 2013 Vehicles, aircraft & vessels 5% Wood products 3% Vegetable product 3% Other 7% Vegetable products 3% Machinery & mechanical appliances Vehicles, aircraft and vessels 3% Wood products Prepared foodstuffs, beverages, tobacco Textiles 1% Other 3% Pulp of wood 5% Prepared foodstuffs, beverages & tobacco 5% Precious & semiprecious metals & stones 6% Chemical products 6% Mineral products 15% Base metals 30% Other unclassified goods 15% Chemical products Precious and semi precious metals and stones 1 Base metals 16% Mineral products 50% Sources: Quantec, SBR
Two commodities make up more than half of imports 41 Import commodities - 2000 Imports commodities - 2013 Miscellaneous manufactured articles Footwear & headgear Optical & photographic equipment 3% Other 10% Miscellaneous manufactured articles Other 9% Base metals 3% Plastics & rubber Vehicles, aircraft & vessels Plastics & rubber Chemical products Textiles 6% Special classification of original equipment 11% Mineral products 31% Machinery & mechanical appliances 2 Original equipment 6% Textiles 5% Chemical products 7% Base metals 5% Vehicles, aircraft & vessels 8% Mineral products 28% Machinery & mechanical appliances 2 Sources: Quantec, SBR
Private and confidential Trade: Africa
43 GDP Africa Key: Per cent 0-1.9 2-2.9 3-3.9 4-4.9 5 and above Sources: IMF, SBR
44 Continued dynamism 14 Output growth, % 12 10 8 6 4 2 0-2 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Oil exporters Middle income countries Low income countries Sources: IMF, SBR
Sub-Saharan Africa 45 Continued dynamism 12 Contributions to output growth 10 8 6 4 2 0-2 -4-6 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Private consumption Public consumption Investment Net exports Discrepancy GDP growth Sources: IMF, SBR
Africa s niche a trade surplus 46 Trade balance with Africa - Rbn Exports to and imports from Africa - % y/y 50 Rbn 90 % y/y 45 40 70 35 50 30 25 30 20 15 10 10 5-10 0 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012-30 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Africa Exports Imports Sources: Quantec, SBR
Exports to Africa rising as Africa s footprint rises 47 Exports to Africa - 2000 Exports to Africa - 2013 Oceania Americas 1 Not allocated 15% Asia 23% Europe 23% Americas 1 Not allocated 11% Oceania 1% Zambia 16.3% Africa 18% Mozambique 15.6% Zimbabwe 15. DRC 9.3% Angola 7.1% Other 36.5% Africa 13% Europe 33% Asia 35% Sources: Quantec, SBR
Imports hold equal stature 48 Imports from Africa - 2000 Imports from Africa - 2013 Oceania 3% Not allocated 1% Africa Americas 15% Asia 36% Europe 30% Americas 10% Not allocated 0% Africa 1 Oceania Nigeria 37. Angola 29.1% Mozambique 12. Zambia 3.9% Europe 43% Asia 46% Zimbabwe 3.7% Other 13.7% Sources: Quantec, SBR
Exports are rich with metals and minerals 49 Export commodities - 2000 Export commodities - 2013 Vegetable product Pulp of wood 5% Textiles Other 10% Machinery & mechanical appliances 16% Plastics and rubber 6% Vegetable products 3% Animal products Wood products 3% Other 8% Machinery & mechanical appliances 20% Plastics & rubber 6% Vehicles, aircraft & vessels 8% Prepared foodstuffs, beverage s & tobacco 9% Base metals 13% Chemical products 13% Mineral products 1 Prepared foodstuffs, beverages, tobacco 8% Mineral products 11% Chemical products 11% Vehicles, aircraft and vessels 1 Base metals 1 Sources: Quantec, SBR
Imports dominated by mineral products 50 Import commodities - 2000 Import commodities - 2013 Miscellaneous manufactured articles Precious & semiprecious metals & stones Vegetable products Prepared foodstuffs, beverages & tobacco Vehicles, aircraft & vessels 1% Chemical products Plastics & rubber 1% 0% Other 1% Base metals 3% Optical & photographic equipment 3% Other 10% Machinery & mechanical appliances Base metals Textiles 3% Vehicles, aircraft & vessels Plastics & rubber Mineral products 31% Chemical products Textiles 6% Machinery & mechanical appliances 2 Mineral products 8 Special classification of original equipment 11% Sources: Quantec, SBR
Private and confidential : malaise to persist
: malaise likely to persist 52 Key forecasts Growth data 2008 2009 2010 2011 2012 2013e 2014f 2015f GDP (% y/y) 3.6-1.5 3.1 3.5 2.5 1.9 2.1 1.9 Final consumption expenditure by households FCEH (% y/y) 2.2-1.6 4.4 4.8 3.5 2.6 2.4 1.1 Gross fixed capital formation GFCF (% y/y) 13-4.3-2.0 4.5 4.4 3.2 2.5 1.5 Government expenditure (% y/y) 4.6 4.8 5.0 4.6 4.0 2.1 2.2 2.2 Exports (% y/y) 1.8-19.5 4.5 5.9 0.4 3.9 7.0 7.5 Imports (% y/y) 1.5-17.4 9.6 9.7 6.0 6.4 6.2 4.5 Current account balance -7.2-4.0-2.8-3.4-5.2-5.7-5.2-4.5 Inflation CPI (% y/y), annual average 11.5 7.1 4.1 5 5.7 5.8 5.8 4.6 Interest rates Prime (year end) 15.00 10.50 9.00 9.00 8.5 8.5 10.0 9.0 Prime (annual average) 15.13 11.81 9.90 9.00 8.25 8.5 9.68 9.79 Exchange rates USD/ZAR (average) 8.27 8.40 7.32 7.26 8.20 9.53 10.94 10.38 EUR/ZAR (average) 12.08 11.66 9.70 10.09 10.55 12.49 14.73 12.97 GBP/ZAR (average) 15.15 13.09 11.30 11.63 13.01 14.97 18.22 16.86 Sources: Bloomberg, SARB, Stats SA, SBR
Private and confidential Thank you
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Shireen Darmalingam* Macroeconomic Strategist +27 11 415 4283 Shireen.Darmalingam@standardbank.co.za