Policy uncertainty index remains in negative territory
The North-West University Business Schools’ Policy Uncertainty Index remained in negative territory in the fourth quarter of 2018.
The business school noted that the economy had moved out of recessionary territory, but that economic recovery was slow.
Growth in 2018 as a whole is estimated at about 0.65%, with the forecast for 2019 at about 1.5%, marginally higher than the World Bank’s recently published expectation of 1.3%.
The South African Reserve Bank has now cut its growth forecast for 2019 from 1.9% to 1.7%, with downside risks.
The weak performance of fixed capital and its implications for further growth performance are noted as being of particular concern; therefore, there is strong emphasis on boosting investor confidence.
Levels of policy and political uncertainty this year are expected to be shaped, either negatively or positively, by five crosscurrents.
The first is the extent to which the economic recovery is underpinned in the months ahead by monetary, fiscal and other policies.
The second is the degree to which inconsistent policy signalling, around issues such as Eskom’s finances and renewed load-shedding, as well as the land reform process outcome, may weaken investor sentiment.
The third is how the forthcoming State of the Nation Address and the National Budget in February will impact on the policy environment and investor confidence.
The fourth is the effect on business and consumer confidence, if there is divisive and populist election campaigning.
Lastly, there is the less supportive world economy.
The business school emphasised that South Africa’s affairs should be settled to best ensure its ability to mitigate any global economic headwinds.
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