SA's economic growth outlook still poor - MMI | Fin24
 
In partnership with
  • Ferial Haffajee

    Why should SAA employees pay for the sins of Dudu Myeni and Jacob Zuma?

  • The Namibian Link

    Evidence is mounting that VBS Mutual Bank aided another elaborate bank heist.

  • Mobile Merger?

    Telkom has confirmed it is in talks to buy network operator Cell C.

Loading...

SA's economic growth outlook still poor - MMI

Nov 01 2016 19:05
Lameez Omarjee

Johannesburg - Having taken a bullish view on South Africa's inflation, MMI Holdings sees further downside risks to nominal growth.

In a statement on the economic outlook issued by MMI Holdings, economist Sanisha Packirisamy explained that Treasury anticipates an average headline inflation rate of 6.1% between 2016 and 2018.

But this is 0.5% higher than MMI’s projected view of 5.6%.

"Given the downside risk, inflation between 2016 and 2018 will be around 5.6%," she said.

Subsequently, MMI expects relative currency strength to emerge in the next three years along with lower food inflation, particularly in 2017. 

Treasury, though, is of the view that inflation is set to remain outside government’s 3% to 6% target range at 6.4% for 2016.

This inflation is mainly driven by higher petrol and food prices. Over the medium term this may be about 6%, with upward pressure from electricity prices.

READ: SA inflation remains high at 6.4%

Growth forecast

MMI’s views do not differ from those of Treasury in terms of the growth trend forecast, explained Packirisamy.

Treasury revised South Africa’s economic growth forecast for 2016 from 0.9% to 0.5% in its mini budget. Treasury expects a moderate recovery in the next three years, with gross domestic product growth reaching 2.2% in 2019.

This in contrast to the period 2004-2007 when South Africa's economy grew by over 4% each year for that period, according to World Bank data. During 2010-2011, South Africa's economy grew by over 3%. 

"For the long term growth outlook, getting back to the old trend may not be possible," said Packirisamy.

Some of the factors holding back South Africa's growth include infrastructure bottlenecks, a lack of competition in key markets, a volatile labour relations environment, regulatory constraints, inefficiencies at state-owned enterprises and policy uncertainty, said Treasury last week. MMI said it agreed with these factors.

ALSO READ: Treasury cuts economic growth forecast to 0.5%

MMI further said that passive economic activity has contributed to the widening of the budget deficit forecast from 3.2% to the revised figure of 3.4%. The deficit is expected to be 0.3% wider than the previously anticipated 2.4% share of GDP in the years 2018 to 2019.

"If there is some slippage in revenue then the fiscal deficit is expected to widen," she said.

The fiscal deficit may narrow if there is an increase in revenue GDP, from 29.7% to 30.4% by 2018. This should be accompanied by a stable expenditure share of GDP at about 33%. 

Treasury's real GDP growth projections


Read Fin24's top stories trending on Twitter:

mmi holdings  |  inflation  |  economy  |  growth  |  budget  |  gdp
NEXT ON FIN24X

 
 
 
 

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

What do you think about private healthcare in SA?

Previous results · Suggest a vote

Loading...