South Africa’s 2017 growth prospects look bleak
BMI Research, a unit of Fitch Group, has cut South Africa’s growth forecast to just 0.7% in 2017, down from 1.0% previously.
The group warned that Eskom and the South African government’s dogged pursuit of nuclear energy were two big alarm bells ringing on the economy, while the recent move into a technical recession would also add pressure.
“The significantly higher costs associated with nuclear technology compared to coal-fired or renewable electricity generation mean that the financial headwinds facing Eskom, and the government’s weakening ability to provide support to the company, will place a significant financial strain on the country if the nuclear power plants are pursued,” it said.
The World Bank earlier this month shifted the country’s growth forecast to 0.6% for 2017, down from 1.1%, citing cited a “deterioration of investor confidence in South Africa amid two recent sovereign rating downgrades to subinvestment grade”.
It also attributed the cut to uncertainty surrounding South Africa’s political sphere, where factions are expected to clash until and during the ANC’s elective conference in December.
Other agencies and groups to cut South Africa’s growth forecast include FNB and Nomura – the former cutting by 0.1 percentage points to 0.6% for the year, while the latter has a very bleak outlook for the country, expecting only 0.2% GDP growth for 2017.
The South African government in February put its own projections at 1.3%, however this was before president Jacob Zuma forced ratings downgrades to junk by firing former finance minister Pravin Gordhan in March, and the country entering recession in June.
The International Monetary Fund is the only group to lift South Africa’s growth expectations – to 1.0% from 0.8% – based on the recovery in the country’s agricultural sector.
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