Financial markets face a turbulent period in 2003 but sound fundamentals should help South Africa weather the storm, according to Standard Bank (SBK) group economist Dr Iraj Abedian.
He also believes that assuming continued adherence to a sound macro-economic policy framework and provided that the rand stabilises, South Africa will continue to be well-positioned as an investment destination.
Writing in Standard Bank’s latest annual report, Abedian cautions that the global economy is bound to slow down, international flows of capital likely to diminish and overall productivity decline.
“Countries with sound economic fundamentals and prudent fiscal policies stand to benefit insofar as they are better placed to weather the storms of insecurity, volatility and uncertainty,” he says.
South Africa, however, is well placed to reap the benefits of its hard-earned macro-economic and fiscal configuration. Moderate growth, underpinned by sound domestic conditions and preferential trade deals with the European Union and the US (under the auspices of the Africa Growth and Opportunity Act) is likely to continue, he adds.
Abedian points out there has been a rise in disposable per capita income among South Africans over the last three years, which has been partly due relatively large fiscal transfers, both in the form of tax breaks and social welfare payments, mainly to the lower and middle income households.
South Africa’s foreign exchange market has also stabilised, suggesting a break from its recent historic trends.
“In the coming year, however, foreign exchange markets are likely to be dominated by the movements in the US dollar. At present, the dollar is depreciating and its structural weakness is unlikely to abate in the short- term. With declining money supply and falling inflation, the national financial sector should retain its stability, enhanced by declining inflation and interest rates.
“Assuming continued adherence to the sound macro-economic policy framework and provided that the currency stabilises, South Africa will be well-positioned as an investment destination. Recent trends in private sector investment are likely to accelerate.
“This again augurs well for South Africa’s growth as well as for consumer spending in the near future despite the rising uncertainties within the global economy.” – I-Net-Bridge