Bleak outlook for SA in 2016 and 2017: report

A new economic report by FocusEconomics paints a bleak picture for the South African economy in 2016 and 2017.

The report, which forecasts the outlook for Sub-Saharan Africa in 2016 and 2017, expects South Africa to experience the slowest growth out of all the major economies in the region.

Real GDP growth is expected to be 1.6% (revised down from previous estimates of 1.7%) in 2016, optimistically increasing to 2.1% in 2017.

Following massive turbulence in the market in the opening weeks of 2016, economists and analyst have revised GDP growth expectations for the country even lower – as low as 0.5% in some cases.

“The county’s outlook is dim. The electricity and water supply constraint will hamper growth by both interrupting production and by discouraging investment,” the group said.

“Moreover, a moderation in Chinese demand and low commodity prices will weigh on growth.”

Further, the group warns that consumer inflation is likely to remain high in 2016, averaging 5.9% for the year, before easing to 5.7% in 2017.

The South African Reserve Bank expects inflation to average 6.0% in 2016 and 5.8% in 2017, the report said.

Inflation inched up from 4.7% in October 2015 to 4.8% in November, hitting a four-month high and putting pressure on the Central Bank to act.

Against that backdrop of a depreciating currency and rising inflationary risks, the South African Reserve Bank hiked the repo rate to 6.25% in November.

Economists have said that it is likely the Bank will again hike rates at the end of January 2016, pushing the repo rate up by 50 basis points or more.

The FocusEconomics panel believes the repo rate will hit 6.85% in 2016, and may even rise to 7.05% by 2017.

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