Technical recession is unlikely - economists
S&P’s Global Ratings’ ‘stay of execution’ is welcomed
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.