SARAH BULLEN in Johannesburg | Wednesday 4.00pm.
BUSINESS confidence dropped by 1,9 index points to 90,3 in July from 92,2 in June, largely as a result of the country’s increasing net open forward position and the vulnerability of the balance of payments, the latest South African Chamber of Business Confidence Index released on Wednesday indicates.
July is the third consecutive month’s fall in the index, which tracks the performance of 13 key economic indicators judged by business to have the greatest bearing on business confidence. July’s fall, however, is significantly lower than June, when the index fell 5,7 index points.
On an upbeat note, Sacob said it seems as if conditions in the money and exchange markets started to improve towards the end of July and that the temporary financial instability may give way to a new economic upswing in the medium term. The recent financial developments, however, will lead to slower economic growth Sacob said, adjusting its growth rate to 1% for 1998. It anticipates the growth rate will rise to between 2% and 2,5% in 1999 as stability returns and as the impact of demutualisation becomes evident.
“Two months before the rand started its slide South Africa was rated as one of the most attractive investment opportunities in the emerging world. In spite of this assessment, global developments are slowly working against this favorable assessment,” the report said.
Although exports will benefit from the recent depreciation of the rand, low commodity prices, international competition, and a slowing global economy will inhibit fast export growth in 1998, Sacob concluded.