Page 15 - 19 Cotton SA September 2019

/ INDUSTRY

The outlook for the global economy remains positive but with huge downside
risks, while the South African economy hovers on the brink of a recession.

confidence decreased. In Germany, new
Table 1: Global economic growth and expected environmental rules limited car production while
growth, 2010 to 2020*.
investment decreased in Italy. Credit conditions
Year World Advanced Developing South tightened, initially in developing countries and
economies economies Africa later in 2018 in developed economies.
2010 5,1 3 7,4 2,9 The IMF adjusted its forecasted economic
2011 3,9 1,7 6,2 3,5 growth downwards and expects global growth to
2012 3,5 1,4 5,1 2,5 slow down from 3,6% in 2018 to 3,3% in 2019
and return to 3,6% in 2020. The April 2019
2013 3,4 1,4 5 2,2 forecast growth for 2019 is 0,4 percentage
2014 3,4 1,8 4,6 1,5 points lower and the forecast for 2020 is 0,1
2015 3,4 2,1 4,3 1,3 percentage points lower than the October 2018
estimate. Table 1 shows the IMF’s economic
2016 3,2 1,7 4,4 0,4 growth and predicted growth to 2020. The IMF
2017 3,7 2,3 4,8 1,4 bases its expected recovery from the second
2018 3,6 2,2 4,5 0,8 half of 2019 on more policy stimulus in China,
improved global financial market sentiments,
2019* 3,3 1,8 4,6 1,2 higher growth in the euro area and more
2020* 3,6 1,7 4,8 1,5 stable conditions in stressed emerging market
Source: IMF WEO, April 2019 economies like Argentina and Turkey. Activity in
the developed world will continue to slow down.
Currently the trade tension between the USA
and China is a major source of concern. Not
only will it have a negative impact on the US
economy but also on global economic growth.
The IMF expects the existing and proposed
US–China tariffs to lower global growth by
0,3 percentage points and if trade differences
escalate to other countries and industries it could
further limit global economic growth.
The Baltic Dry Index (BDI) reflects the cost of
freight and is an indication of global economic
activity. After a sharp decrease to 649 in January
2019, from July 2018, the index recovered to
1 138 in June 2019. Figure 1 shows the Baltic
Dry Index and the Cotlook A Index. The Cotlook
A Index follows the Baltic Dry Index closely and
if it continues to do so, chances are that the
Cotlook A Index may increase slightly in coming
months. However, in its February report the
USDA forecasts a slight decrease of 5% in the
Cotlook A Index from 2017/18 to 2018/19.
They base this on higher production and slow
demand growth. The effect on South African

Volume 21 No 3 September 2019 | 15