ANOTHER organisation has downwardly revised the economic growth outlook for South Africa this year due to strikes and energy supply constraints.
Old Mutual Investment Group South Africa (Omigsa), South Africa’s largest private asset manager, on Tuesday cut its growth forecast for this year to 2.5% from 2.7%, citing strikes on platinum mines, energy supply constraints, and slow spending growth by consumers and businesses.
This follows downward revisions by several organisations including the International Monetary Fund (IMF), the Reserve Bank and HSBC. The IMF revised its growth forecast to 2.3% from 2.8%, while the Bank now projected 2.6% from 2.8%. HSBC cut its growth forecast to 1.8% from 2.6% earlier this year.
In contrast, Finance Minister Pravin Gordhan last week expressed confidence that growth would be higher at 2.7%.
According to economists, structural reforms related to labour laws and quality education would improve growth in the short to medium term and the implementation of the National Development Plan (NDP) would ensure long-term expansion.
"The NDP is a fantastic programme. It needs to be implemented quickly … more infrastructure spending and job creation. We must focus on policy," Omigsa senior economist Johann Els said.
Structural reforms to improve the flexibility of the labour market, better education and skills outcomes, and improved competition would help grow the economy.
HSBC SA economist David Faulkner said improved education and skills outcomes were also important as they were "fundamental to raising productivity growth".
While some of the poor performance can be attributed to a sluggish improvement in global growth, local factors such as strikes and energy constraints are playing a role.
A string of recent economic data including mining and manufacturing suggested weak growth in the first quarter. Retail sales due for release on Wednesday by Statistics South Africa are expected to reflect the same. Growth in retail sales — a key indicator of consumer spending — is expected to have slowed to 3.2% year on year in February from 6.8% in January, according to a median consensus forecast from a BDlive survey of 11 economists.
ETM Analytics economist Jana van Deventer said factors such as elevated consumer inflation, waning household credit growth, higher borrowing costs and "still uncomfortably" high levels of unemployment suggested the scope for consumption to gain traction was muted.
"The prolonged industrial activity in the mining sector could also exert a drag on retail sales at the margin," she said.
Ms van Deventer said the risks to the Treasury and the Bank’s economic growth forecasts for this year were "skewed to the downside" given that the strikes could have "knock-on effects" on other sectors.
Omigsa forecast the prime interest rate — at 9% — to end the year at 10%. Mr Els said the current account deficit would likely narrow to 4.5% of gross domestic product this year from 5.8% last year as export volumes continued to improve while growth in imports moderated
