At the start of the new academic year we would like to welcome back regular readers of this blog and say hello to anyone stumbling across this post via a Google search. If you want to learn more about the School of Economics and this blog, you can have a quick look at the 2012, year in review post, or check out the different teaching and research pages through the tabs above. This post has some of our views for the year ahead.
There are some interesting lists of predictions and stories to watch in 2013:
- It is best to start with The Economist’s calendar. A lot of interesting events are mentioned: In January Ireland takes over the presidency of the European Union, Britain that of the G8. February sees the African Cup of Nations in South Africa and Kenya holds elections in March. Iran holds a presidential election in June and in Memphis, Elvis week is in August. The G20 meets in St. Petersburg in September. “The Hobbit: The Desolation of Smaug”, the second in the Tolkien film trilogy, will be released in December.
- The Guardian has an interesting list of stories from around the world: There is more on the upcoming elections in Israel, Iran and Kenya. They also write that Zimbabwean President Robert Mugabe turns 89 in February and has announced elections for March. They quote an analyst saying: “The electorate has lost trust in election institutions and processes. Turnout will also be low because none of the competing political parties have a workable vision for addressing Zimbabwe’s problems”.
- The Financial Times also has a list with a range of different stories: They consider Western military intervention in Syria (likely), tension between China and Japan (no shots fired), and tension between the US and Iran (also no bombs expected). On the Economics side they expect the Britain will not suffer a triple-dip recession, but is unlikely to generate self-sustaining growth. Despite a bit of uncertainty about the Fed and further QE in the US this week, the expectation is that they, the ECB, Bank of Japan and Bank of England will keep monetary policy loose. The growth of the US economy is not expected to return to the 3% per annum trend growth rate, but 2% still looks good compared to Europe.
If you are wondering about the fiscal cliff, the short answer is that a deal has been reached, but the story is not over yet. The debt ceiling talks are next. The Economist has a short video with more info. And an article explaining why the deal only brings short-term relief.
Economics bloggers have also made lists. You can have a look at Matt Yglesias’ Slate list here. He has interesting bits on the US debt ceiling and global fracking. Tyler Cowen also has an interesting list on the Marginal Revolution blog. He mentions a potential crisis in Spain, dysfunctional politics in Italy and recovery in China. However, his point 7 predicts political collapse in South Africa! We think this is unlikely. Following Mangaung our politics and the economy are more likely to muddle through than crash while we enjoy the cricket, AFCON and the next super ruby series.
But what does all of the above mean for South Africa? FNB economist Cees Bruggemans presents a number of views in his recent Reflections 2012 and 2013 post. Ceteris paribus, low but positive global growth rates should support economic growth in South Africa. That is a 2-3% GDP growth view. Inflation is expected to peak at 6-6.5% by mid-year, but then return to the target range. The dangers lie in the restless local labour market. On Twitter, economist John Loos (@john_loos) also flags the current account deficit as something to keep an eye on. He expects interest rates to remain unchanged and argues that South Africa can still afford to run a sizeable budget deficit.
UPDATE: Since writing this post, there is a whole FNB Economics comment on The shape of 2013. It mentions much of the above, with some comments on what SA policymakers should do.
This blog hopes to present the news and our views as the new year rolls along. Stay tuned.