SA’s economy will pick up next year as commodity prices rise and a historic drought eases, according to the consensus forecast in a Reuters poll, but it is still short of the necessary investor confidence to grow faster.
The poll, taken in the past three days and released on Thursday, predicted the economy would expand 1.1% next year from 0.4% this year, the same consensus forecast made in November.
The latest GDP data for the third quarter showed the economy expanded by only 0.2% compared with a revised 3.5% in the second quarter.
BNP Paribas economist Jeffrey Schultz wrote in a note that he expected growth to gain speed next year, but the trends in gross domestic fixed investment remained concerning.
This type of investment is normally capital spending, such as buying new machinery for future production. The private sector makes up nearly two-thirds of the gross domestic fixed investment contribution to GDP.
“A lack of policy coherence and an increasingly uncertain political environment continue to weigh on both the willingness and ability of domestic corporates to invest meaningfully in the economy,” Schultz said.
The JSE’s all share index has climbed more than 90% since the 2008-09 recession, but companies have been reluctant to invest in the economy even when their balance sheets are healthy.
That is not a problem just in SA. It also affects developed economies like Japan, the US and UK.
Lacklustre growth and unsettling political noise has worried the three major ratings agencies this year.
The country got a reprieve last week from S&P Global Ratings and Fitch, which rates South African debt just one step above junk. Moody’s rating is two notches above.
Still, Schultz expects growth to accelerate, boosted mainly by improvements in agriculture and higher commodity prices.
Southern Africa is recovering from its worst drought in history, which wilted crops and stoked food inflation.
The country is expected to benefit from slower inflation next year, because the central bank will have room to keep interest rates stable at 7% for next year.
Inflation is expected to slow to 5.5% for next year 0.3 percentage points lower than November’s consensus — from a median 6.3% of estimates for this year.
Reuters