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Russia-Ukraine conflict effects to be contained and mostly indirect to SA economy – Godongwana

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FINANCE Minister Enoch Godongwana says the potential adverse effects of the Russia-Ukraine conflict were likely to be fairly contained and mostly indirect to the South African economy.

Minister of Finance Enoch Godongwana. Picture: Phando Jikelo/African News Agency (ANA)

FINANCE Minister Enoch Godongwana says the potential adverse effects of the Russia-Ukraine conflict were likely to be fairly contained and mostly indirect to the South African economy.

DA MP Denis Joseph wrote to Godongwana asking whether the government will adjust the projected economic growth percentage for the 2022/23 financial year due to the Russian invasion of Ukraine.

In his written response, Godongwana said the National Treasury reviewed the economy’s outlook and associated risks as quarterly GDP statistics are made available by the relevant authorities.

He said risks to the outlook were closely monitored and subsequent developments considered in future economic outlook updates.

“With respect to the Russia-Ukraine conflict, the potential adverse effects to the South African real economy are likely to be fairly contained and mostly indirect if the conflict is not protracted,” he said.

The minister also said South Africa had recorded positive real GDP growth during periods when both Russia and Ukraine faced economic recessions, with the exception of global recession periods.

“This suggests that the correlation between South Africa’s growth and Russia’s and Ukraine’s is not as strong, particularly during periods where economic movements are dominated by country-specific factors.”

Godongwana said with the conflict between the two countries still developing and uncertain, it was relatively difficult at this stage to quantify the potential impact with precision and confidence.

“However, South Africa’s trade statistics point to a very weak trade intensity between South Africa and Russia and Ukraine on aggregate. Less than 1% of South Africa’s exported goods are destined for Russia and Ukraine combined,” he said.

“A similar number is reflected on inbound goods that are from both these countries. However, within certain industries, the trade exposure is more significant – such as exports of citrus, apples and pears products – where Russia is an important destination market,” Godongwana said.

However, the Minister said despite the relatively limited direct trade exposure to Russia and Ukraine, risks to the real economy could manifest through the import and export price channels, given the importance of both countries in key energy and agricultural commodity markets.

“The persistent higher levels in these prices as suggested by the futures contracts introduces renewed upside risks to the global and domestic inflation and interest rate outlook.”

He noted that there were risks to the current assessment regarding the impact the conflict may have on South Africa.

“The risks largely depend on how long the conflict persists for,” Godongwana added.

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