A decline in economic growth rates in China and India this year are likely to affect foreign investments and exports of many African economies that have gained from the Asian giants, weakening global growth forecasts in the final quarter of 2013, economists say.
The International Monetary Fund’s latest Economic Outlook Report shows that the growth momentum in the two countries has suffered from delays in the implementation of new investment projects caused by complex business regulations and reduced access to credit, among other factors.
Consequently, India’s growth forecast has fallen to 3.8 per cent for 2013, 0.5 per cent less than the target, according to IMF economists. Growth projections for China similarly dropped to 7.6 per cent, 0.1 per cent below target.
But the economists are hopeful about India’s growth forecast for next year, with projections of 5.1 per cent, in contrast with China’s 7.3 per cent estimate. These sentiments are based on potential gains from ongoing efforts aimed at easing business regulations in India, which are expected to bear fruit by the end of 2014.
As a result of the depressed forecasts for China and India, projected global growth has been revised to 2.9 per cent by the end of the year, compared with the 3.2 per cent posted in 2012. Nevertheless, expectations of a strong recovery of India and other leading economies have boosted projections of global growth to 3.6 per cent in 2014.
In the meantime, foreign direct investment (FDI) flows originating from China and India targeted at mining and manufacturing projects in Africa are likely to drop, with some projects being postponed or cancelled as investors hold out for better economic conditions.
Experts say a significant slowdown in FDI flows is likely to affect businesses contracted to supply goods and services to foreign investors. Export orders of gold, diamond, copper and iron ore may also suffer.