The good, the bad and the ugly of the SA economy

The good, the bad and the ugly of the SA economy

- South Africa have made an upward movement in their economic growth despite the predictions of economists

- Our new president Cyril Ramaphosa has made a positive impact on our country from the start

- Areas of caution have said to be around that of the commercial agriculture and manufacturing sectors

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It seems that South Africa is making good stride in 2018. A recent report by Stats SA shows that SA is moving in a move positive directing with regards to its economy.

The good

A growth of 1.3% from 2017 ha staken place which broke the expectations of economists who forcasted a possible recession.

President Cyril Ramaphosa has da a positive effect on the economy according to senior economist at the World Bank, Marek Hanusch.

“President Cyril Ramaphosa has demonstrated a strong commitment to strengthening institutional integrity – especially in state-owned enterprises – reaching out both to business and labor, and pronouncing his intention to build a new social compact in the country.”

“Finally, the 2018 budget returned to the government’s long-standing commitment to fiscal consolidation, which appeared to have been temporarily abandoned in the 2017 Medium-Term Budget Policy Statement.”

“Business and consumer confidence is up, and market appetite for South African securities strengthened.”

“The rand strengthened by about 12% since the African National Congress (ANC) elective conference and 10-year government bond yields are down to levels last seen in 2015, reducing borrowing costs.”

Hanusch says that SA’s growth is expected to climb with help from inflation and the positive position of the economy.

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The World Bank along with other economists, have revised the growth forecast to that of an upward growth.

The11th edition of the South Africa Economic Update has ut the bank predicted groeth at 1.4% for this year and a wopping 1.8% for next year. Way above the previously expected numbers of 1.1% and 1.7%.

Hanusch said that the predictions are on the conservative side.

“This is largely owed to the fact that confidence still needs to translate into consumer spending, which may be weighed down by the revenue measures of the 2018 budget, and into investment.”

The bad and the ugly

Hanusch outlined that even though South Africa is on a clear upward trend, there is still reason for caution.

“Mining is still held back by uncertainty over legislation, even though the government has reached out to resolve disputes over the country’s third Mining Charter.”

“In addition, World Bank projections suggest that prices for South Africa’s raw materials will remain modest or decline (as in the case of coal).”

Hanusch highlighted the issue around the reconstruction of the Constitution to potentially make it easier to expropriate without compensation, as a definite alarm for commercial agricultural investments.

He also brought to light the caution around the manufacturing sector as it has faced a weighted struggle with regards to global competitiveness which dampens its ability to grow within the world economy.

“Whether growth picks up beyond a modest cyclical rebound will depend on the government’s ability to deliver against high expectations to reduce policy uncertainty and accelerate structural policies that can raise the growth potential of the South African economy more meaningfully.”

“The most recent economic update simulates various reform scenarios and their impact on jobs, poverty, and inequality.”

“It holds some potential good news for South Africa, as inequality is likely to decrease from current levels (South Africa is the most unequal country in the world, according to the Bank’s recent Poverty and Inequality Assessment).”

“Growth and jobs creation will play an important role in making South Africa less unequal, which will help the government’s efforts to strengthen the social compact.”

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