South Africa Economy to Shrink 1.5%, World Bank Says

By Nasreen Seria

June 22 (Bloomberg) -- South Africa’s economy will probably contract 1.5 percent this year, the first drop in output in 17 years, as commodity prices plunge and exports decline, the World Bank said.

Economic growth will probably rebound to 2.6 percent in 2010, the Washington-based World Bank said in its Global Development Finance report. In March, the lender forecast 1 percent growth this year and 3.1 percent in 2010.

Recessions in the U.S., Europe and Japan have slashed demand for commodities, undermining growth in countries such as South Africa, the world’s largest producer of platinum, and Zambia, the continent’s biggest copper producer. The World Bank also cut its 2009 growth forecast for sub-Saharan Africa to 1 percent from a previous estimate of 2.4 percent.

“Output and incomes in the region have been negatively affected by falling commodity prices, falling volume demand for metal and mineral exports, and declining remittances and tourism,” the World Bank said. “The risks for the sub-Saharan Africa region are heavily tilted to the downside.”

The World Bank’s forecasts are lower than those of the International Monetary Fund, which said on April 22 that South Africa’s economy will probably contract 0.3 percent this year, while economic growth in sub-Saharan Africa will slow to 1.7 percent.