Economists were generally upbeat about the International Monetary Fund’s (IMF) country report on South Africa, released on Thursday. The IMF report said the South African government continued to implement sound monetary and fiscal policies during 2002.
It noted that government finances continued to be strong, conditions in the labour market had improved during the year and the government was pursuing restructuring of state assets “vigorously”.
Dawie Roodt, economist at PLJ Financial Services, said the IMF report came as no surprise.
“From the fiscal side (Finance Minister) Trevor Manuel has been doing an excellent job. It could even be argued that he has built enough fat and can now relax a bit. I say this hesitantly as most politicians spend too much, but I think Manuel can afford to. And in the budget speech next month, I think more could be set aside for spending.”
George Glynos, economist at S&P MMS, noted that the news from the IMF comes close on the heels of positive statements made by Standard & Poor’s, which were also complementary about government’s fiscal and monetary policies, praising monetary authorities for keeping their heads when the rand weakened so sharply at the end of 2001.
While Glynos did not think that the report had market-moving potential, he said it was certainly not negative for the markets and would “add to any positive sentiment at the moment”.
Brait economist Colen Garrow said that the IMF report painted South Africa in quite a glowing light and that it must set the stage for a ratings upgrade later in the year.
He added that the issues for South Africa going forward include getting inflation within the target range, getting rid of the NOFP and reducing the forward book and improving growth against the background of cooler global conditions.
“But the report puts South Africa in a good light and it probably explains the currency’s favourable movement for the day,” he said.
The big challenge would be whether the country will be able to attract foreign direct investment flows against the backdrop of reports putting the country in a good light, given global conditions.
He said he doubted whether the momentum could be sustained going forward, as global events are likely to overshadow the positive local picture.
Roodt cautioned that while all the macro fiscal policies are sound, at a micro level there are problems with service delivery — such as getting electricity connected.
From the monetary side, the authorities have also been doing a good job. There were a few slip-ups in 1998 and 2001, but even under pressure they have done what they needed to and have stood their ground. This can be seen in the increases in interest rates last year.
“I do not think the markets will react to this statement as it is not new, but has been factored in,” Roodt said. – I-Net Bridge