New IMF fore­cast

Econ­omy ex­pected to shrug off neg­a­tiv­ity

The Star Early Edition - - BUSINESS REPORT - Ka­belo Khu­malo

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.”

PHOTO: JA­SON BOUD

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.

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