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BER cuts SA's growth outlook as Ramaphoria fades

Jul 06 2018 11:32

Stellenbosch University’s Bureau for Economic Research has downgraded SA’s growth outlook for the remainder of the year to 1.4% from 1.9%. 

“The second quarter brought a stark reality check after the euphoria that characterised the early part of 2018,” said the BER in a summary of its findings on Friday. 

The BER is an economic research institute that forms part of the university's Faculty of Economics and Management Sciences.

The institute said indications were that weaknesses that caused the first quarter’s GDP contraction may have continued into the second quarter, while the country was facing “policy proposals that are unlikely to achieve the necessary balance between a transformation agenda and enabling business sector growth”.

SA’s GDP contracted by 2.2% in the first quarter of the year, the central bank announced in early June. Recent manufacturing PMI data also disappointed

“The initial batch of Q2 data releases suggest that a strong GDP bounce-back after the Q1 weakness – as was the case in 2016 and 2017 - is unlikely,” states the BER. 

The institute noted that the rand exchange rate was under heavy selling pressure during the second quarter. 

“In light of the gathering global risks and an apparent stalling in Ramaphosa’s reform momentum, we have downscaled the rand forecast significantly.”

It said the local currency was expected to trade in a broad range of between R13/$ and R14/$ to the fourth quarter of 2019, ending the period around R13.40/$. The rand was trading at R13.53 against the greenback on Friday at 11:16.

“Headline CPI is projected to average 4.9% and 5.3% in 2018 and 2019. We judge the inflation risks to be on the upside, implying that the next interest rate move by the SA Reserve Bank is likely to be higher," it said.

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ber  |  stellenbosch university  |  gdp growth  |  sa economy


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