The South African economy could get worse before it gets better as it looks set to shrink by 0,5% this year, said RMB’s economics unit in a research note on Tuesday. Their prior forecast was for an expansion of 0,7%.
“However, sad it is to say, reality has overtaken us,” said senior economist Ettiene le Roux.
“After consistently expressing a cautious view about growth prospects in recent months, we now anticipate an even poorer outlook,” he said.
But Le Roux says it is not all “doom and gloom”.
“There are reasons to expect a somewhat brighter landscape in 2010,” he said.
“In a nutshell, our revised projections envisage economic growth slowing from 5,1% in 2007 to 3,0% in 2008 and -0,5% in 2009. This will be the worst
outcome since real GDP contracted by 2,1% in 1992. Back then, South Africa suffered from the bad combination of a severe drought, political upheaval, runaway inflation and a sharp global downturn,” said Le Roux.
While the global recession today is clearly more pronounced, none of the other factors are expected to apply, making this year’s downturn unlikely to be
as bad as that experienced 17 years ago.
Off a low base, RMB’s economists project growth to recover to around 2,5% next year, which they say is only marginally lower than their previous estimate.
They base this improved outlook on a combination of increased government spending, easier monetary policy, rand weakness and companies starting to increase investment, employment and output. — I-Net Bridge