In its World Economic Outlook 2013 Report, the IMF this week typifies the world economy to be in yet another transition and this one also accompanied by much tension.

The world economy is encountering slower growth even as the ending of unconventional monetary policy looms in the US but also eventually later in the decade in Euope and Japan.

Whereas the richer advanced economies have started to grow a little faster, EM space has experienced some loss of growth momentum.

This convergence between them gives rise to tension, in the case of EM countries showing up as slower growth and more difficult financial conditions as unconventional policies are ditched in richer countries.

In some instances, EM growth loss is due to structural causes, such as in China where less reliance needs to be put on investment and export and more on domestic consumption, whereas in others, such as in SA, growth loss is more due to cyclical reasons.

Cyclical growth loss in our case is mainly attributed to too little electricity generation, too little demand in the economy generally, too little building sector activity, too much labour unrest and strike losses.

The IMF says SA growth has slowed further this year to 2% from 2.5% last year. It attributes this to really difficult labour relations, strike losses, weak private investment and weak consumption, the latter reflecting slower disposable income growth and weakening consumer confidence.

For 2014 the IMF sees a slow improvement in SA growth to 2.9% (a very precise number) due to improving global growth and easing of local infrastructure shortcomings (though one wonders whether the latter will really be forthcoming, given the experience of recent years).

Even so, the IMF report qualifies these positive noises by warning that SA growth can still be hamstrung through (what it calls) difficult external funding conditions, still weak business, investor and consumer confidence, continuing difficult labour relations, continuing policy uncertainty and still high household debt levels.

With so many qualifications weighing on the the IMF forecast, one wonders whether growth next year really can be much higher than this year’s 2%?

As to risks, the IMF says that SA is exposed to further slowing or sudden stops in foreign capital inflows, possibly caused by global repricing of risk or through domestic shocks, especially worsening labour unrest.

In summary, EM countries such as SA, with large current account deficits over their balance of payments which require cyclical adjustment, need to reduce their large fiscal deficits and may need to tighten their monetary policy where inflation is out of the target zone.

The normalization of monetary policy in countries such as the US in coming years is likely to make global capital flows less stable.

Exposed EM countries will need to improve their fiscal situation and also allow their currencies to weaken to ease their adjustment.

Importantly, the IMF expresses the view that this should be possible without big new crises occurring.

The EM challenge in coming years is weaker growth and more difficult external financing as US policies slowly normalise.