Economic analysts have revised down their growth rate figures for this year, finds Simon Segal
NOT ONE of nine economic units canvassed this week believes South Africa can reach a three percent rate of growth in gross domestic product, the main measure of national economic activity, this year.
The most optimistic are stockbrokers Frankel Pollak (who still feel GDP could rise by 2,9 percent) and Nedbank (2,8 percent).
Old Mutual thinks two percent is the best that we can hope for this year. But then, when the year began, none of these units thought three percent was possible either. When we conducted the same investigation in January (Rand Merchant Bank was not polled this time) four units felt growth would reach 2,5 percent for this year. The average forecast was 2,3 percent, slightly less optimistic than the 2,5 percent average now.
The difference is that were we to have canvassed views a few months ago, many of the units would have predicted GDP of three percent and even more for this year.
After the economy expanded by only 1,9 percent in the second quarter and declined 3,5 percent in the first, it would now have to grow by eight percent in each of the next two quarters to give an overall growth rate of three percent for 1994.
Next year, all units expect South Africa’s growth prospects to brighten. The GDP forecast varies from three percent (Old Mutual) to four percent (Frankel) and averages 3,5 percent. In January the average was 3,3 percent with a range from two percent (Nedbank) to four percent (Standard Bank).
Along with the higher growth comes higher inflation and a reduced surplus on the current account of the balance of payments, which shows how much in credit or debt the country is with the rest of the world. All units expect higher annual average inflation in 1995 than this year and lower current account surpluses.
Only Nedbank and Stellenbosch’s Bureau of Economic Research think in terms of a double digit inflation rate for 1995. Many more units believe the monthly inflation rate will exceed 10 percent by December 1995, but their forecasts for what inflation will average in 1995 range from nine percent to 10,4 percent (7,9 to 8,6 percent).
On the current account, Standard thinks there will be no surplus next year (for the first time since 1985) and many in the Reserve Bank have also started talking in terms of a deficit next year. Against this, the most optimistic is the Handelsinstituut (R4bn).
For 1995 the units forecast on average a R1,9bn surplus on the current account compared to R3,5bn for this year. In January they were talking R5,9bn on average for this year.
The short-term interest rate outlook has also changed markedly. In January all the units were anticipating at the very least a one percentage point drop in the prime rate, then 15,25 percent, by year end. The prime rate is, in theory, the rate banks charge their best customers and therefore the benchmark rate.
Now, none are thinking of any change from the current 15,25 percent. Only Sacob thinks the prime interest rate will fall next year.
The near-consensus forecast is that growth will pick up next year and be accompanied by higher inflation and interest rates and a reduced surplus on the current account.