The global economy is making progress in recovering from the pandemic and Russia's invasion of Ukraine. China's economy has reopened and is experiencing a strong rebound. Disruptions to the supply chain are resolving, and the energy and food markets are stabilising after the war. Central banks have implemented a synchronised tightening of monetary policy, which is expected to bring inflation back to target levels. The latest World Economic Outlook from the International Monetary Fund (IMF) predicts that global growth will reach a low of 2,8% this year and rise slightly to 3% next year, slightly lower than the January projections by 0,1%. Global inflation is expected to decrease gradually from 8,7% last year to 7% this year and 4,9% by 2024, though the decline may be slower than initially anticipated. Read more in the linked IMF blog post.

The strong recovery in 2021 was followed by the significant shock of Russia's war in Ukraine, which had far-reaching consequences, causing global growth to decline from 6,1% to 3,4% in 2022. The slowdown has persisted this year, despite the unexpectedly resilient labour markets and consumer spending in most advanced economies, as well as China's reopening. We anticipate that the world economy will grow by less than 3% in 2023, which will be reflected in the International Monetary Fund (IMF)'s upcoming World Economic Outlook report. This growth rate is historically weak, both in the near and medium term, with significant differences among country groups. While emerging economies, particularly in Asia, are a bright spot, with India and China expected to account for half of global growth in 2023, others face a more difficult path. Economic activity is slowing in the United States and the Euro Area due to higher interest rates weighing on demand, and about 90% of advanced economies are projected to experience a decline in their growth rate this year. Please click here to access a speech delivered by Kristalina Georgieva, IMF managing director in Washington DC.

Real interest rates have rapidly increased recently as monetary policy has tightened in response to higher inflation. Whether this uptick is temporary or partly reflects structural factors is an important question for policymakers. Since the mid-1980s, real interest rates at all maturities and across most advanced economies have been steadily declining. Such long-run changes in real rates likely reflect a decline in the natural rate, which is the real interest rate that would keep inflation at target and the economy operating at full employment – neither expansionary nor contractionary. The natural rate is a reference point for central banks that use it to gauge the stance of monetary policy. It is also important for fiscal policy. Because governments typically pay back debt over decades, the natural rate –  the anchor for real rates in the long term – helps determine the cost of borrowing and the sustainability of public debts. Read more in the linked International Monetary Fund blog post.

By and large, global grains and oilseeds prices have continued to trend lower. This follows the diplomatic interventions by the United Nations representatives, the Turkish, Russian, and Ukrainian government counterparts to facilitate the safe passage of grain exports out of the Black Sea region through the Black Sea Grain Deal. In March 2023, the Food and Agriculture Organization of the United Nation’s Global Food Price Index, a measure of the monthly change in international prices of a basket of agricultural commodities, was at 126,9 points, down by 2,1% from February 2023. This marked the 12th consecutive monthly decline since reaching its peak one year ago. Notably, the index is down 21% from March 2022. This shows that there is an improvement in the affordability of various agricultural commodity prices since their peak in the month after Russia invaded Ukraine last year. This decline has been observed in most commodity prices across the board, which include meat, dairy, cereals, and vegetable oils. Read more in the linked article by Agbiz chief economist Wandile Sihlobo.

April is an important month in South Africa's agricultural sector, especially for field crops. Later this month, farmers in the Western and Northern Cape, Free State, Limpopo and other winter crop growing regions will start preparing the land for 2023/24 winter wheat, canola, barley and oats production. For now, it is unclear how much area will be planted for each crop. The Crop Estimates Committee (CEC) will release the farmers' intentions to plant data, and key figures for the potential area plantings, on 26 April. We expect most crops' plantings to exceed the five-year average area. For example, the wheat five-year average area planted is 528 690 hectares, which is 7% lower than the area plantings for the 2022/23 production season. Therefore, we doubt that the 2023/24 season will see an area below the five-year average. Wheat prices, although having softened somewhat in recent months, remain relatively attractive for farmers. In the linked article, Wandile Sihlobo discusses this subject.

South Africa’s latest agricultural machinery sales painted a mixed picture. The tractor sales were up by 6% y/y in March 2023, with 677 units sold. Meanwhile, combine harvester sales were down by 9% y/y, with 39 units sold. These data aren’t surprising, and we still believe that South Africa’s agricultural machinery sales will cool off this year, following a few years of excellent activity. For example, South Africa's tractor sales for 2022 amounted to 9 184 units, up 17% y/y and the highest annual sales for the past 40 years. The combine harvester sales amounted to 373 in the same period, up 38% y/y and the highest yearly sales figure since 1985. In the linked article, Wandile Sihlobo discusses the latest agricultural machinery data.

The African continent remains the largest export market for South Africa's agriculture. In the record agricultural exports of US$12,8 billion in 2022, the African continent accounted for 37%. Importantly, this was not an anomaly. The continent has accounted, on average, for 38% of South Africa's agricultural exports by value per annum over the past five years. Unlike the other regions South Africa exports to, where the composition of products is predominantly fruits, beef, wool and wine, maize is the leading export product in the African continent. Other products exported to the rest of the African continent include apples, wheat, animal feed, prepared foods, wine, fruit juices, soybean oil, sunflower oil, alcoholic beverages, and soybean oilcake. In this week's podcast, Wandile Sihlobo covers these issues. Please click here to peruse.

The United Nations has published its 2023 report on financing for sustainable development, which calls for “massive” investments in sustainable transformations in electricity, industry, farming, transportation, and buildings, to close the widening development gap between countries, meet climate goals, and achieve the SDGs. The Financing for Sustainable Development Report (FSDR) 2023 themed, "Financing sustainable transformations," highlights some positive findings on financing for sustainable development. Please click here to peruse.

Public debt soared to a record during the pandemic, topping global gross domestic product. Now, with government debt still elevated, the rise in interest rates and the strong US dollar are adding to interest costs, in turn weighing on growth and fueling financial stability risks. With several economies already in debt distress, the International Monetary Fund explores in an analytical chapter of its latest World Economic Outlook what policies work best to durably reduce public debt ratios (or debt to GDP). Using two decades of data, we find that an adequately tailored fiscal contraction of about 0.4 percentage points of GDP – the average size in our sample – lowers the debt ratio by 0,7 percentage points in the first year and up to 2,1 percentage points after five years. Read more in the linked International Monetary Fund blog post.

Historic high levels of global egg prices are having a significant impact on the worldwide egg supply, and it raises questions about how long this situation will last and whether there are ways to stabilise supply. We anticipate that prices will remain relatively high throughout 2023, particularly in markets heavily affected by avian flu, high costs, and regulatory changes. While there may be some decline in prices in other markets, they are unlikely to return to pre-2021 levels as input costs remain high. One way to stabilise markets is to improve value chain cooperation, particularly through greater commitment from buyers to offset farmers' high production risks. This cooperation can help balance the supply-demand equation and reduce price volatility. The other main strategy is to better control avian flu in heavily affected countries. Read more in the linked article by Nan-Dirk Mulder, senior analyst - animal protein at Rabobank.

The Trade Law Centre NPC (Tralac) notes that African states should keep track of the European Union’s carbon order adjustment mechanism (CBAM) as implementation advances. As the reality of the CBAM sets in, and the pool of research modelling the impact of the CBAM on third countries grows, alarm bells are ringing for many of the EU’s trading partners. The linked Tralac blog post looks at what is known about the contents of the compromise text, what the predicted impacts are for African states, and how they might respond. 

Port operations this week encountered various challenges including adverse weather, frequent equipment breakdowns and shortages, load-shedding, backlogs, delays, and congestion. While weather conditions in Cape Town remained favourable with minimal delays reported, congestion worsened during the latter part of the week, resulting in average berthing delays exceeding 10 days compared to eight days at the beginning of the week. The Port of Durban communicated its operational plans for the Easter weekend, while the first phase of the Bayhead bypass road in Durban was opened on Monday morning to alleviate frequent congestion on Bayhead Road. Transnet also issued a call for partners on Tuesday to assist in establishing a company that will lease rolling stock such as wagons and locomotives to the market, with a deadline set for 30 June 2023. The outlook for international trade remains sub-par, despite a slight upgrade to GDP projections since last fall, according to WTO economists. Trade is currently weighed down by the ongoing effects of the war in Ukraine, stubbornly high inflation, tighter monetary policy, and financial market uncertainty. Read more in the latest BUSA Covid-19 Cargo Movement Update.

South Africa will host the 11th World Avocado Congress, to be held in 2027. The winning bid was announced on the final day of the 10th World Avocado Congress, held in Auckland, New Zealand, from 2 to 5 April. Delegates voted on the destination for the next event. “Congratulations to South Africa. It is a huge honour to host this important event,” said Jen Scoular, president of the World Avocado Congress Committee and chief executive of New Zealand Avocado. For more information, please click here.

According to Justin Chadwick, CEO of the Citrus Growers' Association of Southern Africa, the South African citrus industry is anticipating a more positive season this year following what he referred to as a "disastrous" year in 2021. Chadwick cited last year's doubled freight rate, which accounted for 30 to 40% of growers' costs, as a major setback to returns. Additionally, the EU changed its regulation on false codling moth, which made it impossible for growers to comply and resulted in exporters paying an extra R300 million to have fruit cleared at EU borders. Although market prices were okay, they were not sufficient to cover all the additional costs. Chadwick also noted that the ports continue to operate below optimal efficiency. Read more in the linked article first published on FreshPlaza.

The Citrus Growers' Association of Southern Africa (CGA), shares the latest news in the citrus industry in its weekly update - From the desk of the CEO. Please click here to peruse.