It is possible for economic growth in South Africa in 2018 to surpass all current expectations, but “much depends on what is announced in the Budget speech”, says National Association of Automobile Manufacturers of South Africa (Naamsa) director Nico Vermeulen.
The budget is to be announced on February 21.
The South African Reserve Bank said earlier this month that it expected 1.4% gross domestic product growth this year, with the International Monetary Fund forecasting 0.9% growth.
Vermeulen says the national Budget should show government’s commitment to responsible fiscal management, while also ensuring that parastatals and State-owned enterprises operate according to appropriate business principles.
An all-important halt to further credit downgrades is another key factor in potentially boosting economic growth, he notes.
Also, if the rand continues to strengthen as it has since Cyril Ramaphosa took over as president of the African National Congress in December, inflation could decline further, potentially leading to a drop in interest rates.
This could boost the South Africa economy in general, and new-vehicle sales in particular.
Naamsa expects new-vehicle sales to grow between 2% and 4% this year.
After spending three years in negative territory, South African new-vehicle sales finally managed to inch forward in 2017, growing by 1.8% to 557 586 units, compared with 2016.
New-vehicle sales dropped by 11.4% in 2016, 4.1% in 2015 and 0.7% in 2014.
New-vehicle exports from South Africa in 2017, at 329 053 units, were down 4.6% on the 344 820 vehicles exported in 2016.
Domestic production declined from 600 007 units in 2016 to 588 000 units in 2017.
“Recent developments in the last few weeks have set the scene for improved business confidence and sentiment. But it is early days still,” warns Vermeulen.