Economists expect around 1% gr owth for 2017
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.