Simon Segal
THE consensus forecast from 10 of South Africa’s major economic units is that gross domestic product (gdp) growth is still short of what is required to absorb people coming on to the labour market — and that it will slow next year.
Sluggish and slowing growth will result in lower interest rates but not lower inflation, which will rise marginally as imports become more expensive owing to the rand’s plunge. With imports more expensive and exports cheaper, the deficit on the current account will fall.
When last polled at the end of 1995, the consensus forecast of the 10 was that gdp would grow 3,2% this year and 2,4% in 1997. Six months and a plunge in the rand later, this outlook is similar — the average gdp forecast is still 3,2% for this year and 2,7% for 1997.
It is not that nothing has changed. Had the economists been polled before the rand started plunging in February, they probably would have reflected a higher gdp forecast for this year and next — there was talk of 4%. Some units are probably still going to revise downwards their gdp forecasts.
Only two — Frankel Pollak and the South African Chamber of Business (Sacob) — expect the economy to gain momentum next year; the rest see a lower gdp for 1997 than 1996. Sacob is expecting the country to benefit from better world economic growth, lower domestic interest rates and higher manufacturing investment.
The most optimistic for 1996 are the Bureau of Economic Research (BER) and Amalgamated Banks of South Africa (both project gdp of around 3,5%). The most pessimistic is Sanlam (2,9%). For 1997, the forecasts vary from as low as 2% (Old Mutual) to 3,5% (Frankel Pollak and Sacob). All agree that growth this year is being underpinned — to the tune of one to 1,5 percentage points — by the agricultural sector, where output is expected by some to rise by as much as 30%.
The inflationary outlook ranges from 7,2% to 8,3% (7,8% on average) for this year and a wider 6,5% to 10,1% (8,1%) for next year. All expect the monthly inflation rate to rise before starting to fall next year, but only three units are banking on 1997 to see lower inflation on average than 1996.
Most of the economic units expect the prime rate to fall a further one percentage point this year. Next year all expect further drops in prime, some to as low as 15,5% (Old Mutual).
The biggest discrepancies are in the forecast size of the current account deficit. The average forecast is for the deficit to fall from R8,4-billion this year to R5,2-billion next year. All units agree that it will be lower but the range is anything from R6- billion (Frankel Pollak and Sacob) to R13-billion (BER) this year and R1-billion (Sanlam) to R11- billion (BER) next year.