SA’s growth forecast is slashed
BANK of America’s wealth management arm Merrill Lynch has become the first institution to slash South Africa’s growth forecast as the latest private sector activity data disappointed, highlighting the challenge it will be to revive the economy. The firm yesterday cut its forecast for growth for this year from 1.6 percent to 0.9 percent, with more organisations expected to follow suit.
It further cut its growth forecast for next year from 1.8 percent to 1.5 percent. However, it expected no rating changes during November reviews, but said further revenue shortfalls, increasing populist pressures and a need for stateowned entities bailouts could raise downgrade risks after the February Budget. “Focus on land and other populist measures will detract from long-term structural reforms to support the cyclical recovery, in our view,” Merril Lynch said.
The group’s assessment came a day after official data showed the country had slipped into recession – its first since 2009.
Investec has already indicated its appetite to revise South Africa’s growth forecasts. “We will likely revise our GDP forecast downwards for 2018, from 1.4 percent year-onyear,” said economist Lara Hodes.
The bank said the possibility of further financial market stress, escalating trade protectionism and heightened geopolitical tension had left the economy vulnerable.
Adding pressure to the ailing economy was the Standard Bank Purchasing Managers Index (PMI) which painted a dire picture of the country’s economy. The PMI released yesterday fell from 49.3 points in July to a 29-month low of 47.2 points during August.