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Africa Economy in December 2013

Source: OPEC 1/15/2014, Location: Africa

The biggest economy in Africa grew at the slowest pace in more than four years in the 3Q amid strikes at car plants cut manufacturing output. South Africa’s GDP rose an annualized 0.7% compared with the 2Q, when output increased a revised 3.2%. Strikes by workers at carmakers in the 3Q curbed output from an industry that accounts for almost 10% of the economy. Manufacturing output, which makes up 15% of the economy, declined an annualized 6.6% in the 3Q, the only industry to contract. Mining climbed an annualized 11.4%, agriculture gained 3.6% and construction increased 2.1%. General government services expanded 0.4% and the retail and finance industries rose 1.3% each. The reserve bank has cut its 2013 economic growth forecast last month to 1.9% from 2.0% and kept the benchmark repurchase rate at the lowest level in more than three decades to help support consumer spending. The reserve bank said that there is no room for cutting interest rates as further currency weakness my fuel inflation. South Africa’s current account deficit widened to 6.8% of GDP in the 3Q, the biggest gap in more than five years, as a weak currency boosted import costs while strikes and subdued global demand hurt exports. The gap in the current account grew to an annualized $22.6 billion. In November, South Africa’s PMI posted 51.6 to signal a second consecutive improvement in overall operating conditions at the country’s private sector companies. This reading is the strongest in 11 months, although up only fractionally from October’s 51.5. The survey detected an acceleration in new orders growth in addition to the first increase in export orders in six months.

Egypt’s economy has received a vote of confidence as the rating agency Standard & Poor’s raised the country’s sovereign credit ratings to B- which reflects a stable outlook. This upgrade means that Egyptian authorities have secured sufficient foreign currency funding to manage the country’s short-term fiscal and external financing needs. Cash inflow from GCC countries is the main driver behind this improvement. Egypt’s non-oil producing private sector companies reported solid increases in activity and new orders in November, with the rates of expansion being the quickest recorded in survey history. At 52.5, the headline PMI edged back into expansion territory in November, ending a 13-month period of deteriorating operating conditions in Egypt’s non-oil producing private sector.

The parliament of Morocco approved 2014 budget of €30 billion, 3.1% less than the 2013 budget. The new approved budget foresees reducing the deficit-to-GDP ratio to 4.9%, down from 7% in 2013. The 2014 budget consists of austerity measures imposed on the fund used to subsidise basic consumer items. The official forecast of next year’s GDP growth stands at 4.2%.

The fiscal deficit in Ghana is forecast to narrow to 8.5% of GDP in 2014 from an estimated 10.2% this year, according to official statement. Ghana is struggling to reduce a budget gap that reached 12% of economic output in 2012 during a presidential election year. The government has tried to compensate for a rise in public wages which now amount to 74% of tax income, by cutting subsidies for fuel, water and electricity. It also raised the value-added tax rate last month to 15% from 12.5%. Fitch Ratings last month lowered Ghana’s credit rating to B from B+ as the government failed to achieve its fiscal deficit goal of 9% for this year and overran spending on interest payments.

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