A war with Iraq will negatively affect South African markets, which would otherwise have a positive outlook, Dawie Roodt, Chief Economist of PLJ Financial Services says.
Speaking at a business function in Stellenbosch, Roodt said that a prolonged war would be bad for all markets. He believes that world markets require certainty on this issue.
“Should there be a war, it will certainly impact on local markets. Firstly, it could lead to higher oil prices. This in turn may lead to an increase in the gold price. Secondly, the war may affect international economies which will affect local trade with these markets,” he said.
On the local front, Roodt says that if the exchange rate remains stable in 2003, consumers can look forward to lower short-term interest rates, the poor to poverty alleviation and businesses to a healthier bottom line.
He says inflation is likely to decline in 2003, while the rand is also likely to weaken going into 2004. According to Roodt, the State is currently in a much healthier financial position, due to its conservative fiscal stance.
“This means that it can concentrate less on stabilising government finances, but focus more on boosting local economic growth.
“The man in the street has already started to reap the rewards through tax relief and more government spending on pressing social issues such as poverty alleviation.”
Roodt says that while South Africa will be affected by international events, local economic aggregates should remain the most important driver behind the investment decisions of the local investor.
He believes South Africans who are fixated on the international markets could miss out on investment opportunities in the local market.
“For some reason we forget that South Africa has an economy of its own. Not only are most South African assets exceptionally cheap, the South African economic cycle is doing pretty well under its own steam.”
Roodt suggests South Africans should be less fixated on international happenings and start to concentrate on local economic issues. He says the recent budget is a good place to start.
This year, lower income groups will receive more tax relief than the higher income groups. Roodt cautions that the state should guard against placing an excessive burden on the wealth creators.
“During 2002, the South African economy was boosted through increased exports due to a weaker currency. In 2003 the picture looks a lot different. Exports will contribute less to the overall GDP, with the slack taken up by stronger local demand, especially by the state.” – I-Net-Bridge