Goldman Sachs sees SA growth topping 2.4 percent

GLOBAL investment banking group Goldman Sachs is backing South Africa’s economy to grow more than 2.4 percent this year, but warned that the current round of public sector wage negotiations presents a litmus test for the Ramaphosa presidency.

Goldman economist Andrew Matheny said the lender might raise its forecast for South Africa’s economic growth again as risks to its previous estimate were “tilted to the upside”.

“The market does not yet appear to be pricing in meaningful structural reforms and we see scope for a significant further re-rating higher of growth expectations,” Matheny said.

“Our own growth forecast for 2018 stands above consensus at 2.4 percent, with risks tilted to the upside.”

Goldman earlier this year said South Africa would be the big emerging market story of 2018.

The lender revised its growth forecast for 2018 from 1.5 percent to 2.4 percent post Cyril Ramaphosa’s election.

South Africa has seen a surge in both consumer and business confidence since the elevation of Ramaphosa as first head of the ANC and subsequently as head of state.

However, activity data released last week suggested that growth faltered in the first quarter. Mining production decreased 8.4 percent year-onyear in March. It was the biggest fall in mining production since March 2016.

Stumbled

Manufacturing output, however, stumbled year-on-year in March.

It fell 1.3 percent year-onyear in March, the first drop in manufacturing production since September last year.

John Ashbourne, an Africa economist, said the recent activity data all suggest that South Africa’s economy stumbled in the first quarter.

“We however, maintain our above-consensus gross domestic product growth forecast of 2 percent over 2018 as a whole,” Ashbourne said.