Old Mutual cuts SA’s growth forecast

Old Mutual Investment Group is the first group in the financial sector to cut its 2017 economic growth forecast since the IMF released a grim report on SA last week.

Economic growth has been cut to “a sickly” 0.8% from 1.2%, according to the group’s economic strategist, Rian le Roux. “[It’s] far below what is required and presents yet another year of disappointment,” he said.

SA urgently needed a recovery in confidence to avoid a deep structural decline, Le Roux told a media briefing on Wednesday.

“The economy is at risk of an extended period of sub-potential growth, with slow growth in recent years already to blame for rising macroeconomic vulnerabilities and rating downgrades,” he said.

Old Mutual revised its economic growth forecast after a series of “major shocks” including the Cabinet reshuffle, credit ratings downgrades, a revised Mining Charter and the public protector’s challenge to the central bank’s mandate.

Le Roux pointed to the IMF’s call for the government to reassure business and consumers of the direction of policies.

The IMF said last week that while it still expected economic growth of 1% in 2017, policy uncertainty linked to political turbulence would weigh on confidence. In addition, growth had stalled.

It placed responsibility for growth squarely on the Treasury, which responded with an “inclusive growth action plan” on Thursday. Economists, however, are not convinced that it is a growth-inducing plan.

In the absence of a material recovery in business, investor and consumer confidence, Le Roux said SA was at risk of getting trapped in a protracted period of weak economic growth and further social and fiscal pressures.

The investment strike could be extended if there was no improvement in confidence levels soon, he warned.

Despite the bleak long-term picture, Le Roux said he was anticipating a stronger second quarter based on economic data released so far.

Manufacturing improved in the three-month period ended in May. SA’s retail sector had an increase in April despite the recession, signalling the second quarter may be stronger on the consumer side. Mining production also surprised on the upside on Thursday with a 3.6% yearon-year increase.