The Annual Broll Property Report 2013

The outlook for an upturn in world growth in 2013 is brighter than that of 2012 when the risk lay with renewed recession across a number of major economies.

Economic conditions improved modestly in the third quarter of 2012, with global growth increasing by approximately 3 percent. The main sources of acceleration were emerging market economies, where activity increased broadly as expected, and the United States, where growth exceeded expectations. Financial conditions stabilized, while bond spreads in the euro area declined and prices for many risky assets, notably equities, rose globally. Capital flows to emerging markets remained strong

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Supportive policies have underpinned much of the recent acceleration in activity in many economies. Given the assumption of lower commodity prices in 2013, weakness in advanced economies will undoubtedly weigh on external demand, as well as on the terms of trade of commodity exporters. Economic growth in sub-Saharan Africa is expected to remain robust, with a rebound from flood-related output disruptions in Nigeria contributing to overall growth in the region in 2013.

As the euro zone and US economies recover, there is clearly potential for companies’ earnings and share prices to rise further. This in turn could have a positive indirect effect on financing conditions as banks become more inclined to lend to households and companies.

With the 2011 financial market uncertainties in the euro zone, stock markets in the principal advanced and emerging countries were 10 - 12 percent down on the year. the negative effect on both business and consumer was palpable during this period. However, stock markets in the euro zone are now 10 - 12 percent higher.

This turn in investor sentiment and sharp rally in euro zone financial markets can be ascribed to the relatively soft landing for the economy in china, the resolution of the uS fiscal debate and indications that emerging markets are accelerating again. the boost in investor confidence has been accompanied by an appreciation of the euro against a basket of currencies. However, despite euro appreciation, economic forecasts indicate that the currency is stronger than warranted by economic fundamentals and that, during 2013, economic differentials between the US and euro zone will emerge, and expectations are that the euro will depreciate against the US dollar.

The euro zone is one of South Africa’s main trading partners and conditions in the euro zone materially impact on economic prospects for this country.

Nigeria and South Africa account for one-half of sub-Saharan Africa’s entire GDP, and are potentially major drivers of growth for the region as a whole. Projections for 2013 show South Africa is lagging the rest of sub-Saharan Africa in economic growth, but the projection for 2014 and beyond looks more encouraging. it appears clear that projected growth in sub-Saharan Africa will exceed 5.5 percent led in west Africa by Ghana and Nigeria and in east Africa by Mozambique.

The negative growth projection for the euro zone in 2013 likewise suggests that the South African economy still has a hard road to travel before economic conditions can improve. Currently, at least 12 countries in sub-Saharan Africa export to South Africa. South African companies continue to invest in the rest of Africa and this has an impact on shaping trade flow. This investment is also reflected in the financial sector, where a number of Nigerian and South African banks have extended their operations in many countries in sub-Saharan Africa.