Energy crisis a global problem: Kganyago

Reserve Bank Governor Lesetja Kganyago says the energy crisis is not only a South African problem but a global one. Kganyago was speaking at the ongoing World Economic Forum (WEF) in Davos, Switzerland.

Stage 6 rolling blackouts were implemented for the most part of last week but have since been reduced to Stage 4 and 5 this week. Power utility Eskom expects fourteen of its power generators to return to service during the course of this week.

“All countries are facing rising inflation and that rising inflation is also accompanied by energy challenges. We have seen energy prices that rise last year. So last year South Africa is no exception to rising inflation. But what we have also seen is that there are concerns about what is going to happen to the global economy, this when the Covid shock hit us our economy was already in any case facing its own structural challenges which are now becoming more pronounced with the energy situation.”

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Global recession risk

Meanwhile, the World Economic Forum’s January 2023 Chief Economists Outlook finds that growth prospects remain anaemic, and the risk of a global recession is high. This comes as almost two-thirds of economists surveyed by the WEF expect that there will be a recession in 2023. At the same time, the IMF has cut its forecast of global GDP for the year to 2.7%- from 2.9%

Economists project slow global economic growth for 2023. This comes as the recent World Economic Forum CEO’s survey found that two-thirds of private and public sector chief economists expect a global recession this year. Their concern is that slow growth is worse than a recession as it lasts longer.

Senior vice-president and chief economist at Automatic Data Processing Inc, Nela Richardson says: “What I perceive is slow growth rather than a recession because slow growth is worse than a recession.”

At the same time, Raghuram Rajan, the Katherine Dusak Miller Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business, says Africa is to experience another tough year.

“Just in Africa, I think the biggest issue is fuel, food. It’s going to be a tough time.”

South Africa’s growth for 2022 is expected at less than 2%.