World Economy

Encouraging Signs Emerge in South Africa

Encouraging Signs Emerge in South Africa Encouraging Signs Emerge in South Africa

This year could see South Africa’s economy bottoming out somewhat, leaving the country at a low base for recovery next year, Econometrix (South Africa’s leading independent economic consultant firm) director and chief economist Dr. Azar Jammine told delegates at the Infrastructure Africa Conference.

“The year 2016 proved to be awful,” he said. Inflation was likely to fall in 2017, while interest rates were expected to remain steady. The rand had also stabilized, with no likely spikes or dips expected, opening a “wonderful” opportunity for exporters and industry to leverage the rand, eNCA reported.

In addition, there were indications that commodity prices were starting to edge up and the El Nino 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 year.

   Ideological Barriers

“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 the result of 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 had recently provided South Africa 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 pushed South Africa into junk status, leading to soaring inflation and interest rates and the collapse of the rand.