This year could see South Africa’s economy bottoming out somewhat, leaving the country at a low base for recovery next year, Econometrix director and chief economist Dr Azar Jammine said at the recent Infrastructure Africa conference.
He said inflation was likely to fall in 2017, while interest rates were expected to remain steady.
The rand had also stabilised, with no likely spikes or dips expected, opening a “wonderful” opportunity for exporters and industry to leverage the rand:dollar exchange rate, improve productivity and bolster export rates.
In addition, there were indications that commodity prices were starting to edge up and the El Niño phenomenon that had hit many parts of the world hard, including South Africa, was now over.
Summing up his overall outlook on the economy, Jammine noted that the country’s trade balance was improving and that the Purchasing Managers Index was encouraging, particularly the improving ‘expected business conditions’ components.
South Africa’s electricity constraints had “loosened up enormously” over the past year, owing to expanded capacity and lower demand, with no more detrimental load-shedding expected in the next 12 months.
“But recovery is likely to be shallow in the face of an absence of major take-off in global growth and commodity prices, as well as ongoing ideological fault lines,” he warned, referring to ongoing trade union, capital and political spats.
However, despite this, South Africa could escape recession and even see some emergence of growth in a few years.
Jammine said he was further encouraged at how the circling global credit ratings agencies had forced government minds to focus on what needed to be done.
However, government could only do so much, with roughly half of the impediments to economic growth brought about by international forces and, therefore, out of South Africa’s hands.
The country was working to control the half it could and, while still facing major challenges, global growth prospects were looking slightly better.
Three global ratings agencies recently provided South Africa with a downgrade reprieve, with Fitch, Standard and Poor’s and Moody’s all opting to affirm their investment-grade ratings of the country.
Any downgrade would have relegated South Africa to ‘junk’ status, leading to soaring inflation and interest rates and the collapse of the rand.