IMF to Lower 2012 Growth Forecast

The International Monetary Fund will lower its forecast for global growth in 2012 later this month as the crisis emanating from Europe continues to threaten economies as far-flung as South Africa and its less-developed African neighbors, the fund's chief said Friday.

South Africa and other African nations "will clearly suffer setbacks if the European crisis is not addressed promptly," IMF Managing Director Christine Lagarde said on a visit to Pretoria. She added that the IMF was looking to lower its forecast for global growth in 2012 below the 4% mark it foresaw in its September World Economic Outlook.

South Africa's Finance Minister Pravin Gordhan, who met with Lagarde during her three-day trip, which will also include meetings with South Africa's central bank governor and President Jacob Zuma, echoed her concern that Europe's woes could continue to drag on Africa's largest economy this year.

"We would like to see a quicker resolution and more decisive steps taken in Europe," Mr. Gordhan said.

The European Union is South Africa's largest trading partner. Falling demand for the country's minerals and manufactured goods from the EU has prompted Mr. Gordhan and other South African officials to reorient the country's trade patterns toward Asian powers such as China and India and fast-growing African economies like Nigeria.

Ms. Lagarde said pursuing new trade ties is almost always beneficial, but not at the expense of traditional partnerships. "Opening trade is difficult enough so I don't think it would be wise to close the trade that exists between South Africa and Europe," she said.

Ms. Lagarde is on her second visit to sub-Saharan Africa since assuming the IMF's top post last year. Last month she visited Nigeria and Niger and made similar commitments to try to help small nations weather any fallout from a persistently uncertain global economic environment.

"The IMF is going to be very attentive to the role played by banks, particularly in trade finance," she said, referring to the business of funding export contracts, traditionally dominated by European banks now reeling from the euro debt crisis.

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