A new economic report by FocusEconomics paints a bleak picture for the South African economy in 2016 and 2017.<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
“The county\u2019s outlook is dim. The electricity and water supply constraint will hamper growth by both interrupting production and by discouraging investment,” the group said.<\/p>\n
“Moreover, a moderation in Chinese demand and low commodity prices will weigh on growth.”<\/p>\n
Further, the group warns that consumer inflation is likely to remain high in 2016, averaging 5.9% for the year,\u00a0before easing to 5.7% in 2017.<\/p>\n
The South African Reserve Bank\u00a0expects inflation to average 6.0% in 2016 and 5.8% in 2017, the report said.<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
The FocusEconomics panel believes the repo rate will hit 6.85% in 2016, and may even rise to 7.05% by 2017.<\/p>\n
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