The Bureau for Economic Research (BER) has forecast a more upbeat economic outlook for South Africa in the next 18 to 24 months, with real growth domestic product expectations of 1.9percent this year increasing marginally to 2percent next year.
In its 2018 second quarter economic prospectus released on Friday, the economic research institute wrote that a more upbeat forecast for private sector fixed investment, a lower inflation profile, accommodative monetary policy and favourable global demand conditions have resulted in them adjusting their forecast for 2018 in particular.
BER noted that risks to the baseline forecast were more or less balanced and, if anything, tilted to the upside.
With the rand exchange rate strengthening substantially early this year, they projected a mild weakening over the forecast horizon to an average of about R12.35 a dollar in the fourth quarter of next year.
Headline consumer price index inflation was expected to remain relatively stable, averaging just below 5percent over the entire forecast horizon.
Consumer spending was expected to benefit from low inflation, a strong rand exchange rate and accommodative monetary policy. Private sector fixed investment was likely to accelerate on the back of increased business confidence and the improving growth outlook.
BER economist and author of the forecast, Harri Kemp, said the new administration had made all the right noises in terms of what was needed to boost growth, having started off on a strong footing with some reform at the big, state-owned companies.
“There have been a few hiccups along the way (think the land expropriation debate and the delay around mining charter negotiations), but with the team President Cyril Ramaphosa has assembled and the apparent willingness to talk reforms, we might indeed be on the right track,” Kemp said.
He highlighted that at this stage they estimated the potential growth rate of the economy at about 2 percent, with remaining structural constraints limiting the ability of the economy to grow at a faster rate.
“We need to tackle some of the issues raised above to improve productivity, lift investment and improve labour market absorption in order to lift economic growth closer to the 4 percent to 5 percent mark.” He added that South Africa needed to first “tackle the lowhanging fruit”, which was to get business and consumer confidence back on track, with potential to fuel investment and spending increase policy certainty, particularly in the mining sector, and to sort out the governance issues in state owned companies.
-iol business report
