Financial markets economist Marisa Fassler is more than just a number cruncher, though her forecasting skills helped her to win the Reuters Economist of the Year title, which rewards accuracy in predicting key economic indicators. She was the only economist polled by Reuters and Bloomberg to predict a rate hike at the June meeting of the Reserve Bank’s monetary policy committee.
“You have to engage with the numbers,” she says, but adds that, although both are relevant, analysing the relevant economic factors is possibly more important than the accuracy of forecast.
Fassler holds a BA and a master’s in development studies, which, although unusual for a person in her career, has helped her to analyse issues affecting emerging markets.
She has been at JP Morgan for nearly four years now, and sees her role as one of interpretation. “We all have the same information in front of us and what we choose to hear out of the mouth of government. We’re constantly interpreting the way they view the world. And once we have that framework, we interpret the flow of data against that framework.”
She reckons the decision to raise rates was the right one, although it surprised many analysts at the time. “At the June meeting, they obviously had data that we didn’t have. We knew the current account data would be bad, but we just didn’t know how bad. You’ve got to give them credit for taking a tough decision that needed to be taken.”
There is a still a significant risk that rates will go higher. Fassler forecasts a rise in October and another 50 basis-point increase in December, which would mean a cumulative move of 200 basis points since June this year. After that, she says, the risk will still be to the upside, although she’s betting the bank will wait a while before raising rates again, to see what the impact is on consumer demand.
“We’re still coming from a very high base. The last quarterly bulletin [of economic data] showed [consumer demand of] 8% growth, which is exceptionally strong. I was surprised by the consumer confidence figures, which were still very high, despite petrol prices and rate increases.”
Fassler says the underlying buoyancy in the economy remains, because of tax cuts, the wealth effect and real income growth. “But we’ve seen a change since June,” she adds, referring to the rand’s slump and increased interest rates. “I think by the end of the year we’ll see a rotation, with the supply side contributing more to growth than demand.”
Considering how good she is at predicting the Reserve Bank’s next move, has she ever considered working there herself?
“I have a lot of respect for people who are in a policymaking role, and often I don’t envy policymakers. I always wanted to work for the treasury or the Reserve Bank, but I ended up in financial services. I think it must be very exciting to be a policymaker in South Africa today. You have an opportunity to really write the rules.”
Despite the pain of trade liberalisation, she says the economy is better off because of it. “We did get to our targets sooner than we needed to and we underestimated the impact liberalisation would have. But the benefits outweighed the negatives — lower inflation, increasing competitiveness, and the consumer is in a better position, and it was an untenable situation. It wasn’t the only change that took place at that time. We also had a very strict fiscal policy and parastatals restructuring, which resulted in large-scale job losses.”
Now, says Fassler, “fiscal policy is a non-issue, and we have room to spend money. We’re in a favourable position now, but it didn’t come without cost.
‘The first step is growth. It’s encouraging that in the last couple of years we have created jobs, but it’s not nearly enough.” There needs to be a balance between industrial policy and the services sector, because lower-skilled workers are left out of jobs growth in service industries.
“We need to look at areas [of manufacturing] where we are competitive and create incentives for labour-intensive investment,” she says, citing tax incentives, red tape and encouraging small businesses as possible measures.
“It’s not just going to go away. We need a targeted government programme to get things right. It’s very hard for any country to be competitive with India and China. It’s not going to help to put trade barriers up. It’s only going to disadvantage the consumer.”