Econ­o­mists ex­pect around 1% gr owth for 2017

The Witness - - YOU MONEY -

ECON­O­MISTS ex­pect growth to av­er­age around one per­cent for 2017 and among the rea­sons for this is unc er­tainty fol­low­ing the cabi­net reshuf­fle in March.

Dur­ing a p anel dis­cus sion at the Dis­cov­ery F inan­cial Plan­ning Sum­mit, held in S and­ton on M on­day, econ­o­mists shar ed their pr ojec­tions for the ec onomic out­look.

The panel of ex­perts in­cluded Colin Cole­man, head of in­vest­ment bank­ing of Gold­man Sachs sub­Sa­hara Africa, Nazmeera M oola, ec onomist and strate­gist at In­vestec As­set Man­age­ment and Et ti­enne le R oux, chief econ­o­mist at R and M er­chant B ank (RMB).

Gold­man Sachs’ growth fore­cast is at 1,5%. How­ever, Moola said growth ex­pec­ta­tions had been r evised down from 1,7% to 0,9% fol­low­ing the cabi­net reshuf­fle in which Pres­i­dent Ja­cob Zuma re­placed Pravin Gord­han with Malusi Gi­gaba as F inance min­is­ter.

Moola said gr owth w ould s tem from s tronger c om­mod­ity pric es, a greater agri­cul­tur al harv est and im­proved tourism num­bers.

Le Roux said RMB’s growth fore­cast was be­tween 0,5% and one per­cent for 2017 and be­tween one per­cent and 1,5% for 2018. He said im­proved pro­duc­tion in the min­ing sec­tor, fol­low­ing an uptick in com­mod­ity prices, would con­trib­ute to growth.

He ex­plained that the growth rate isn’t im­prov­ing faster over a num­ber of fac­tors linked to un­cer­tainty.

For one, cor­po­rates are not in­vest­ing and ar e be­ing “v ery cau­tious” about spend­ing money, said Le Roux. Busi­ness con­fi­dence is lo w as CEOs are un­cer­tain about the fu­ture. In this case, cor­po­rates do lit­tle to build new ca­pac­ity.

“In the cur­rent en­vi­ron­ment of po­lit­i­cal un­cer­tainty they in­stead fo­cus more on c ost cuts.”

Le Roux said that CEOs would be look­ing to boost ef­fi­ciency and to re­struc­ture gi ven the ec onomic en vi­ron­ment.

He said con­sumers are un­der pres­sure be­cause their in­comes are un­der pres­sure given mod­er­at­ing wage in­fla­tion and a higher t ax bur­den.

“A higher tax bur­den will shave off one full per­cent­age point off in­come growth,” said Le R oux.

As a re­sult of the pres­sure, con­sumers have been dip­ping into the pen­sion and prov­i­dent funds when switch­ing jobs, choos­ing cheaper short­term in­sur­ance and med­i­cal aid to save money and more ten­ants are de­lay­ing pay­ment on their r ent, he said.

Both con­sumers and cor­po­rates are be­ing cau­tious about how they spend money, said Le R oux.

He said fall­ing in­fla­tion was a re­flec­tion of the w eaker ec on­omy. W ith con­sumers be­ing pr es­sured, com­pa­nies have been fac­ing in­creas­ing com­pet­i­tive pres­sure.

“Com­pa­nies don’ t ha ve pric­ing pow­ers,” he said. Com­pa­nies are not quick to change prices as this w ould risk them los­ing mar ket share.

— Fin24.

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