Tech­ni­cal re­ces­sion is un­likely - econ­o­mists

S&P’s Global Rat­ings’ ‘stay of ex­e­cu­tion’ is wel­comed

The Star Early Edition - - NEWS - Philippa Larkin

SOUTH AFRICA is likely to avoid a tech­ni­cal re­ces­sion when Stat­stics SA re­leases gross do­mes­tic prod­uct (GDP) data to­mor­row, econ­o­mists say.

In­vestec economist Kamilla Ka­plan said last week that first quar­ter GDP growth was forecast at 0.8 per­cent quar­ter on quar­ter sea­son­ally ad­justed an­nu­alised, fol­low­ing the 0.3 per­cent quar­ter-on-quar­ter contraction in the fourth quar­ter of last year.

This as South Africans breathed a sigh of re­lief on Fri­day af­ter S&P’s Global Rat­ings main­tained the coun­try’s sov­er­eign credit rat­ing with a long-term for­eign cur­rency sov­er­eign credit rat­ing of “BB+”, and a long-term local sov­er­eign cur­rency credit rat­ings of “BBB-” with a “neg­a­tive” out­look.

Ka­plan said re­cent eco­nomic re­leases sug­gested that the im­prove­ment would come from pos­i­tive con­tri­bu­tions from the agri­cul­ture and min­ing sec­tors.

“The dis­si­pa­tion of the drought in most of the coun­try and higher com­mod­ity prices are ex­pected to have sup­ported in­creased ac­tiv­ity in the agri­cul­ture and min­ing sec­tors re­spec­tively,” she said.

Elna Mool­man, an economist at Mac­quarie Se­cu­ri­ties, warns that the risk to the rat­ings will per­sist. She said last week that the pos­si­ble fur­ther credit rat­ing down­grades were one of the cur­rency risks that the Mon­e­tary Pol­icy Com­mit­tee high­lighted last week, when it kept the repo rate un­changed de­spite lower in­fla­tion and growth fore­casts.

Mool­man ex­pected the SA Re­serve Bank “to pause through 2017, given the el­e­vated cur­rency risks from credit rat­ings and other fac­tors, but it could cut in­ter­est rates early in 2018 by a cu­mu­la­tive 50 ba­sis points.

Mool­man ex­pects GDP growth of around 0.6 per­cent in the first quar­ter of the year.

“We ex­pect some sup­port from a post-drought agri­cul­tural re­cov­ery and a strong re­bound in min­ing pro­duc­tion, which will likely be coun­ter­acted by con­trac­tions in the man­u­fac­tur­ing as well as the whole­sale and re­tail trade sec­tors. We ex­pect low pos­i­tive growth in most of the other sec­tors,” she said.

Look­ing ahead, Mool­man forecast around 1 per­cent eco­nomic growth for 2017, with a “mod­est down­side risk”.

“For 2018, we are slightly more bear­ish (at 1.2 per­cent) than the con­sen­sus (at 1.6 per­cent). This mainly re­flects our view that any re­cov­ery in pri­vate sec­tor fixed in­vest­ment and em­ploy­ment once this year’s el­e­vated pol­icy and po­lit­i­cal risks have sub­sided will take some time to ma­te­ri­alise even if the out­comes of the ANC con­fer­ences are growth­friendly,” Mool­man said.

Mamello Matik­inca, FNB’s Se­nior Economist, also held a bear­ish out­look on growth.

“Our fore­casts sug­gest that the first quar­ter will show 0 per­cent quar­ter-on-quar­ter growth. While we an­tic­i­pate dou­ble digit quar­ter-on-quar­ter ac­cel­er­a­tions from the agri­cul­ture and min­ing sec­tors, over­all growth is set to be held back by weak man­u­fac­tur­ing, re­tail and trans­port num­bers,” Matik­inca said.


Gold dumps around Jo­han­nes­burg. Pos­i­tive con­tri­bu­tions to the coun­try’s GDP are again ex­pected from the min­ing sec­tor.

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