2013 South African economic outlook

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11 Feb 2013

The global downturn in GDP is set to continue in 2013 through to 2014 and is expected to ease in 2015, according to Dr Azar Jammine, chief economist at Econometrix.

According to Sizwe Nxedlana, FNB chief economist, the outlook for 2013 is positive despite a revised GDP growth from 3 percent to 2.7 percent.

Jammine was speaking at the Economic Outlook Conference 2013 held at the Gordon Institute of Business Science in Illovo, Johannesburg.

Read about the 2012 outlook here.

According to the International Monetary Fund (IMF) revisions, world GDP is expected to reach 4.1 percent in April, 3.9 percent in July and 3.6 percent in October.

Furthermore, IMF forecast growth for South Africa to be 3.6 percent between 2012 and 2016.

Jammine points out that the economy in South Africa is growing slowly with more money being invested into the financial markets.

He believes that if interest rates continue at their lowest levels, 2013 could be a good year for South Africa, pointing out that foreign investors have been buying bonds hence the liquidity in the bond market.

The Rand will remain under pressure but will not crash. However, he reckons some changes will happen as the world recognises that there are opportunities in the emerging markets as it is cheaper to buy in those markets than the developed markets.

“You can buy more with a Dollar in SA than in the US,” he says.

Econometrix expects the Rand to reach R9.10 against the USD by the fourth quarter of 2013.

Other issues of concern include high levels of youth unemployment, increased dependency on social grants and social unrest due to low levels of service delivery.

He expects interest rates to remain low and against this background, he believes a three percent economic growth for South Africa is not impossible.

Econometrix expects the Rand to reach R9.10 against the USD by the fourth quarter of 2013.

Professor Adrian Saville, chief investment officer of Cannon Asset Managers, expects the economy to grow by 2.5 percent while the Sub-Saharan will reach 6.6 percent.

Saville says the economy is very sluggish, coupled with a weak Rand, however, he says interest rates will remain low in 2013.

For Annabel Bishop, group economist at Investec, the lowering of GDP forecast is a worry although interest rates will remain low.

Bishop is concerned about the Eurozone as investors are quite nervous and confidence is very low.

She expects the economy to grow by 3.1 percent pointing out that the government needs a flexible labour market (in light of Marikana in 2012) and there is a need to change its thinking in order to encourage investor appetite.

According to Sizwe Nxedlana, FNB chief economist, the outlook for 2013 is positive despite a revised GDP growth from 3 percent to 2.7 percent

Nxedlana expects household consumption to moderate and unsecured lending to be curbed.

On a scale of zero to 10, he would rate the economy at five saying the fundamentals are looking up.

Meanwhile, Nedbank senior economist Nicky Weimar says although the economy lost significant momentum in Q3 2012, it is still growing and she expects growth of 2.6 percent in 2013.

Read the article here.

Weimar notes that domestic spending has been outpacing domestic production since the start of the recovery in 2010 and that the production of the economy has been under pressure for some time.

“Producers struggled with sluggish exports due to a weak global economy and the strikes aggravated circumstances,” says Weimar.

She too points to the fact that foreigners continue to buy South African bonds, and that the Rand will remain under pressure reaching R8.66 against the USD in 2013.

Weimar anticipates interest rates to be flat with the first hike expected in November although the market consensus is early 2014.

2013 State of Nation Address

This week will see focus shifting on President Jacob Zuma’s State of the Nation Address (SONA) to Parliament on Thursday, 14 February.

The 2013 SONA will be the first that is delivered in the context of the National Development Plan, which has been adopted as the high level framework and national roadmap to which all government programmes and plans will be aligned from 2013 with a focus on implementation, according to The Presidency.

According to Bishop, the presentation will likely affirm the policies that Government has put into place to address inequality, poverty and unemployment, and re-iterate the adoption of the National Development Plan (NDP) in this regard.

“While many will watch out for key issues such as the youth wage subsidy and reclassifying teaching as an essential service to reduce absenteeism from classrooms due to strike action and union meetings, these may not be elaborated on to avoid straining the relationship with Cosatu,” she says.

Bishop points out that South Africa has instances of significant wastage, inefficiencies and corruption, with a large number of schools failing to receive textbooks, high teacher absenteeism and a very poor quality of the maths and of the education system on an international comparison.

The NDP clearly identifies the failings of civil servants for the parlous state of the education system and it will be telling if the President focuses on this particular area of service delivery and the necessary steps which need to be taken to turn the system around from among the worst in the world to one of the best in the world. SA is a long way off from this turnaround, she says.

The 2013 SONA will be the first that is delivered in the context of the National Development Plan, which has been adopted as the high level framework and national roadmap to which all government programmes and plans will be aligned from 2013 with a focus on implementation, according to The Presidency.

Mac Maharaj, spokesperson for The Presidency says the Plan was endorsed by all political parties in the National Assembly on the 15August 2012 and enjoys the support of all sectors of society.

The NDP was produced by the National Planning Commission (NPC) in the Presidency chaired by Minister Trevor Manuel with Cyril Ramaphosa as deputy chairperson.

The NPC was established by President Zuma in 2009 and was given the task of producing the national plan within 18 months, he explains.

“In SONA 2013, the President will provide an update on all key programmatic areas, especially the five priorities, education, health, creating decent work, the fight against crime as well as rural development and land reform.”

In addition, President Zuma will also outline progress made in the implementation of the New Growth Path (promotes inclusive growth and job creation in six job drivers - infrastructure development, agriculture, mining and beneficiation, manufacturing, the green economy and tourism), the economic strategy within the NDP, he adds. – Denise Mhlanga

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