SA economy looks set to gain ground as drought ends

SOUTH Africa’s economy would pick up next year as commodity prices rose and a historic drought eased, according to the consensus forecast in a Reuters poll, but it was still short of the necessary investor confidence to grow faster.

The poll, released yesterday, predicted the country’s economy would expand 1.1 percent next year from 0.4percent this year.

Gross domestic product (GDP) data for the third quarter showed the economy expanded by 0.2 percent compared with a revised 3.5percent in the second quarter.

Jeffrey Schultz, an economist at BNP Paribas, wrote in a note he expected growth to gain speed next year, but the trends in gross domestic fixed investment remained concerning.

This type of investment is normally capital spending, such as buying new machinery for future production. The private sector makes up nearly two-thirds of the gross domestic fixed investment contribution to GDP.

The all share index climbed more than 90 percent since the 2008/09 recession, but companies have been reluctant to invest.

That is not a problem just in South Africa. It also affects developed economies such as Japan, the US and UK. Lacklustre growth and unsettling political noise has worried the three major ratings agencies this year. Inflation is expected to slow to 5.5 percent for next year. – Reuters