SA ‘vulnerable to low investor confidence’

South Africa is vulnerable to a worsening of investor confidence due to reliance on portfolio flows to finance its current account deficit, the Organisation of Economic Cooperation and Development (OECD) said on Thursday, adding it sees a return to growth in the fourth quarter.

The government has forecast the economy will contract by 1,9% in 2009, but has also predicted the country will exit its first recession since 1992 in the fourth quarter, aided by improved global demand and expansionary policies as it prepares to host the soccer World Cup next year.

In its latest economic outlook, the OECD said Africa’s largest economy should press on with a planned increase in public spending in 2010, but this should be on a sustainable medium-term basis.

”The World Cup will provide an impetus to activity in the first half of 2010. Consumption and business investment should gradually pick up as confidence returns,” the OECD said, warning however:

”South Africa remains vulnerable to a worsening of investor confidence, given its reliance on portfolio flows to finance the sizeable current account deficit.”

South Africa’s current account shortfall is seen narrowing to 4,9% of GDP in 2009, compared to 7,4% last year, but should expand again to 5,7% in 2010.

While appetite for emerging market assets in general had picked up and seemed likely to continue to recover, a renewed flight from risky assets remains a possibility.

”Investor sentiment could be hit by South Africa-specific factors, such as growing pressures on the government for the adoption of populist economic policies or the re-emergence of electricity supply constraints,” it added.

President Jacob Zuma is under pressure from his trade union and communist allies to shift economic policy to the left, including abandoning such market-friendly policies as inflation targeting. — Reuters

We make it make sense

If this story helped you navigate your world, subscribe to the M&G today for just R30 for the first three months

Subscribers get access to all our best journalism, subscriber-only newsletters, events and a weekly cryptic crossword.”

Related stories


Already a subscriber? Sign in here


Latest stories

No good will come of overturning Roe v Wade

The US supreme court’s ruling on landmark abortion case will be felt most keenly by women

Citizens expect ‘bloodshed’ ahead of Zim’s 2023 elections

Human rights body says research indicates the polls are viewed as a nightmare instead of an opportunity

New Joburg high school boasts a R3m eSports Arena

The tech-forward school requires every child to purchase an Asus laptop, use Microsoft software for lessons and check-in daily on a mental wellbeing app

UPDATED: Eskom confirms stage dix load-shedding from 4pm to 10pm...

The power utility says it experienced unplanned losses of 14 204 megawatts as wage-related protest action intensified

press releases

Loading latest Press Releases…