Dif­fer­ing views on SA’s likely growth path

The Star Early Edition - - BUSINESS REPORT - Wise­man Khuzwayo

S&P GLOBAL Rat­ings yes­ter­day said a range of neg­a­tive shocks that dragged down the South African econ­omy had run their course, while the World Bank pre­dicted that 2016 would leave South Africans worse off on av­er­age.

S&P said it ex­pected sub­dued growth of 1.4 per­cent this year and 1.8 per­cent in 2018.

As a re­sult, in per capita terms, South Africa’s real gross do­mes­tic prod­uct (GDP) growth would move into pos­i­tive ter­ri­tory only in 2018.

The rat­ings agency said neg­a­tive shocks that dragged down GDP growth in South Africa, such as fall­ing com­mod­ity prices and a se­vere drought, had run their course.

“Nev­er­the­less, long-stand­ing struc­tural con­straints, such as a skills short­age and rigidi­ties in labour and prod­uct mar­kets, still hold back eco­nomic growth. Po­lit­i­cal ten­sions re­main high, weigh­ing on the con­fi­dence of do­mes­tic and for­eign in­vestors,” it said.

S&P said a weak macroe­co­nomic en­vi­ron­ment, high house­hold in­debt­ed­ness and ris­ing in­ter­est rates bur­dened the hous­ing mar­ket.

“Res­i­den­tial prop­erty prices stag­nated in real terms in 2016 as above-mar­ket in­fla­tion eroded nom­i­nal price gains,” S&P senior econ­o­mist Ta­tiana Ly­senko said.

“Home prices im­proved at the end of 2016 as fi­nan­cial con­di­tions sta­bilised. Still, sub­dued eco­nomic growth, per­sis­tent very high un­em­ploy­ment and el­e­vated con­sumer in­debt­ed­ness do not bode well for the South African mar­ket in the near term, es­pe­cially if in­ter­est rates con­tinue to rise.”

S&P pro­jected muted nom­i­nal house price growth of 5.5 per­cent this year, which would im­ply stag­na­tion of prices in real terms. The fore­cast for nom­i­nal house price growth is 6.5 per­cent in 2018.

The World Bank said in its ninth South Africa eco­nomic up­date it es­ti­mated growth in 2016 to be 0.4 per­cent, mak­ing it the third year of de­clin­ing GDP growth, leav­ing South Africans worse off on av­er­age.

“GDP is set to ac­cel­er­ate in 2017 and 2018, to 1.1 per­cent and 1.8 per­cent re­spec­tively, a mod­est re­cov­ery pro­pelled by im­prov­ing com­mod­ity prices, dis­si­pat­ing drought ef­fects, and do­mes­ti­cally by strength­en­ing con­sump­tion and, cau­tiously, ex­ports.”

The bank said stronger growth was also ex­pected to be sup­ported by a markedly im­proved sup­ply of elec­tric­ity and smoother labour re­la­tions.

“Al­though ac­cel­er­at­ing, growth will still fall short of the pace that is needed to cre­ate 11 mil­lion jobs in or­der to re­duce un­em­ploy­ment to 6 per­cent by 2030, and achieve sig­nif­i­cant re­duc­tions in poverty and in­equal­ity.”

World Bank senior econ­o­mist Marek Hanusch and pro­gramme leader Sébastien Des­sus say last year’s es­ti­mated growth of just 0.4 per­cent has left the av­er­age South African worse off.

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