South Africa’s electricity shortages are likely to lop a full percentage point off the country’s 2015 gross domestic product (GDP) growth. But Standard Bank chief economist Goolam Ballim expects lower fuel prices will help stimulate household spending during the year, supporting an overall rise in growth to 2.3%, from an estimated 1.5% in 2014.

Nevertheless, South Africa’s power problems will weigh down energy-intensive exports and production and curtail private fixed investment, which will continue to lock South Africa into a low growth pattern of between 2% and 2.5% for three to four years – a growth performance that is about half the rate of economic expansion achieved ahead of the ‘great recession’.

“That speaks to our natural athletic ability given our power constraints and given what land, labour and capital can do in the absence of any alteration in base energy supply,” Ballim explains.

The power crisis is also undermining the potency of the weaker currency to act as a corrective force for South Africa’s large current account deficit, which has remained close to 6% of GDP, despite the rand having weakened materially over the past four years. The bank expects the rand to trade at an average of R11.62 to the dollar during 2015.

“It really speaks to the failing shock-absorber mechanism of a weak exchange rate, which isn’t being harnessed simply as a function of output forgone in the absence of reliable power,” Ballim outlines, while indicating that the deficit could fall to 4.5% of GDP in 2015, not as a result of the weaker rand, but owing to the lower oil price.

Standard Bank anticipates that household spending, which accounts for about two-thirds of GDP, will rise by 2.4% in 2015, from 1.2% last year, spurred by an improvement in personal finances brought about by the sharp fall in the oil price, which has already resulted in domestic fuel prices falling by nearly 30% since August.

At $50/bl, Ballim estimates cumulative consumer savings of R42-billion during 2015, falling to R32-billion and R24-billion at $65/bl and $75/bl respectively.

He also describes the unexpected decline in the oil price as the most profound factor shaping the global economic outlook since the global financial crisis of 2008/9. The bank’s ‘base case’ is for the lower price to endure for a sustained period, owing to Organisation of the Petroleum Exporting Countries’ unwillingness to forfeit market share in favour of a higher oil price.

In its Medium-Term Oil Market Report 2015, the International Energy Agency indicates that oil prices, which slumped from $115/bl in June to nearly $45/bl in January, will probably improve during 2015, but market participants do “not seem to be expecting prices to revisit earlier highs any time soon”.

Standard Bank anticipates that global growth will be bolstered by as much a 0.6 of a percentage point as a result. But oil-exporting economies, including Nigeria and Angola, will experience a double whammy from lower oil prices and weaker Chinese demand.

The bank expects China to grow by 6.9% in 2015, its slowest rate since the early 1990s. The slowdown will negatively affect sub-Saharan African (SSA) exports, which are strongly aligned to the $10-trillion economy’s investment spending – for every percentage point move in China’s fixed investments, African exports rise or fall by 0.6 of a percentage point.

Ballim is “wary” about the effect of China’s slowdown on Africa, including South Africa, forecasting that SSA’s growth will slow to 4.7% in 2015, the slowest rate of expansion in more than a decade and below the 5.5% average achieved over the past 20 years.