New IMF forecast
Economy expected to shrug off negativity
THE INTERNATIONAL Monetary Fund (IMF) yesterday said it expected South Africa’s economy to shrug off the sluggish consumer and business confidence and grow by 1 percent this year, up from the 0.8 percent forecast in April.
THE INTERNATIONAL Monetary Fund (IMF) yesterday said it expected South Africa’s economy to shrug off the sluggish consumer and business confidence and grow by 1 percent this year, up from the 0.8 percent it had forecast in April.
Maurice Obstfeld, a chief economist at the IMF, said the slight upward revision to 2017 growth relative to the April 2017 World Economic Outlook (WEO) forecast reflected a modest upgrading of growth prospects for South Africa, which is experiencing a bumper crop due to better rainfall and an increase in mining output prompted by a moderate rebound in commodity prices.
“Growth this year in sub-Saharan Africa is projected to be higher than last year, but remains barely above the population growth rate, implying stagnating per capita incomes.
“The outlook for South Africa, however, remains difficult, with elevated political uncertainty and weak consumer and business confidence, and the country’s growth forecast was consequently marked down for 2018,” Obstfeld said.
Last month, Rand Merchant Bank and Bureau for Economic Research (BER) reported that business confidence in the second quarter tanked to a level of despondency last seen during the 2009 recession due to persistent weak business activity.
And statistics from the First National Bank (FNB)/ BER consumer confidence index released earlier this year showed that South African consumers continued to be under pressure in the second quarter of this year after the index dropped to -9 points from the -5 points recorded in the previous quarter.
The IMF’s WEO update for July said South Africa’s economy would grow by 1.2 percent next year, down 0.4 percent it had forecast in April.
The IMF’s upbeat growth this year differs from the forecasts of other multinational institutions and most South African economists.
The SA Reserve Bank last week cuts its growth forecast from 1 percent to 0.5 percent this year, while it revised down growth for 2018 from 1.5 percent to 1.2 percent and growth for 2019 has been revised down from 1.7 percent to 1.5 percent.
The World Bank last month slashed South Africa’s growth outlook to 0.6 percentage points this year, down 0.5 percentage points from the 1.1 percent it had forecast in January and attributed this to political uncertainty and low business confidence weighing down on investment.
The country’s major banks have had mixed views on the growth expected this year.
FNB has revised down its growth from 1.1 percent to 0.7 percent, while Standard Bank has marginally revised its forecasts from 1.2 percent to 1.1 percent. However, Nedbank has revised up its forecast for this year from 0.7 percent to 1.1 percent, while Absa has not changed its forecast, maintaining growth at 1 percent for this year.
Obstfeld said among low-income developing countries, commodity exporters generally need sizeable adjustment to correct macroeconomic imbalances.
“Policy priorities for diversified low-income developing countries vary, given the diversity of country circumstances, but an overarching goal for these economies should be to enhance resilience against potential future shocks by strengthening fiscal positions and foreign reserves holdings while growth is strong.”
Checkers store customers in Sea Point, Cape Town. South African consumers continued to be under pressure in the second quarter of this year, the consumer confidence index shows.