Lower demand for South Africa's merchandise exports from the eurozone will have a substantially negative direct effect on the economy.
Should export sales to the euro area be only 5% lower than in 2011, the Industrial Development Corporation estimates that domestic growth will contract by R5.9-billion and 187 00 jobs will be lost.
A macroeconomic impact analysis conducted by the IDC's National Development Finance Institute said the eurozone crisis continued to hinder economic activity around the globe. If the detrimental effect on trading patterns continued, South Africa would be one of the Brics (Brazil, Russia, India, China and South Africa) economies most affected.
"Lower export sales to European markets (-6.2% or close to R5.4-billion less) and more subdued demand in Asia (export growth of 6.5%) and the Americas (4.6% growth) contributed to a substantial deterioration in the trade deficit to a cumulative R51.1-billion during the first semester of 2012, as compared to a R2.5-billion deficit over the corresponding period last year," the IDC report said. "The eurozone is an important export market for many economies, consuming more than 34% of Russia's merchandise exports, about 14% of China's, almost 18% of Brazil's, close to 17% of South Africa's and just more than 13% of the United States's merchandise export basket."
World manufacturing activity contracted further in July this year as advanced and emerging economies experienced pressure. The local manufacturing sector shed about 44 000 jobs in the second quarter relative to the opening quarter of 2012.
The report found that if export sales to the eurozone dropped by 5% there would be a 0.4% contraction in manufacturing value-add.
The report also warned that a worse than anticipated slowdown in key emerging markets such as China and India would place commodities exporters under increasing strain.
Because of strong industry linkages, the economy-wide impact would extend beyond agriculture, mining and manufacturing to numerous service-related sectors such as transport and finance.