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SA economy poised for growth, and a stable repo rate in 2017

Thursday, 26 January 2017

SA’s economy will get a boost from perkier commodity prices, a benign inflation outlook, and better rains for the agriculture sector this year, a Reuters poll found on Thursday. The 27 economists in the poll suggested growth in SA would accelerate to 1.1% this year and 1.6% next year. The South African Reserve Bank (SARB) estimated GDP expanded 0.4% last year.

"Higher commodity prices in combination with lower inflation, stable interest rates and a recovery in the agricultural sector should drive 2017 growth somewhat stronger than in 2016," said Elize Kruger at NKC African Economics. Twelve of 14 economists believed that growth in SA has left the slow expansion trap seen in previous quarters.

SA’s growth has been choppy in the past two years, with negative quarterly performances three different times on an annualised basis since 2014. However, KPMG’s Christie Viljoen says positive growth is expected, though it will be very low. Economists back their claims with the annualised growth rate in the SARB’s leading indicator, which has turned positive, but they caution about the risks that lie ahead. SA’s economy relies heavily on the wellbeing of the eurozone, its biggest trading partner as a single region, and China, its biggest trading partner as a single country.

Stable rates

Consumption should get a boost if SARB does not hike interest rates this year. All 27 economists expect the repo rate to be kept on hold at 7% at SARB’s meeting on January 24. Medians for the rest of the year suggest no change for the repo rate after Tuesday’s policy announcement. There is just more than a one-in-three chance of a cut this year. "The bank may still have a change of heart in its rate stance come the second half of this year, opening up room for it to cut policy rates later in the year," said BNP Paribas economist Jeffrey Schultz.

Still, consumer inflation is expected to slow to an average of 5.8% for this year — 0.2 percentage points shy of SARB’s top-end comfort level — and 5.5% in 2018. It was at a 6.4% average last year.

Bron: Businessday (19-01-2017) http://www.businesslive.co.za/bd/economy/2017-01-19-sa-economy-poised-for-growth-and-a-stable-repo-rate-in-2017/

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