It said South Africa’s economy, which grew by 0.5% in 2016 (2017 Budget Review), would not show much improvement with 0.6% growth in 2017 and 1.1% in 2018, before showing more gains in 2019 of 2%. The projections for 2017 and 2018 are 0.5 and 0.7 percentage points less respectively than its January 2017 figures.
The figures paint a far gloomier picture than the SA Reserve Bank’s latest economic projections. It said on 25 May that it had revised growth projections down to 1.0% (2017), 1.5% (2018) and 1.7% (2019).
These figures were lower than the official growth projections revealed in the 2017 Budget Review, which expected growth figures of 1.3% (2017), 2% (2018) and 2.2% (2019).
The SA Reserve Bank’s reasoning for the lower projections were due to “the expected impact of the sovereign credit ratings downgrade on domestic private sector gross fixed capital formation in particular”.
The World Bank agreed, saying a “deterioration of investor confidence in South Africa amid two recent sovereign rating downgrades to subinvestment grade” have impacted its economic growth.
S&P Global Ratings and Fitch Ratings downgraded South Africa’s credit rating to junk status in April after President Jacob Zuma removed Pravin Gordhan as finance minister.
The World Bank mentioned South Africa’s “heightened” and “higher-than-anticipated” political and policy uncertainty at least three times in the Global Economic Prospectus report, titled: “A Fragile Recovery”.
It said that “political uncertainty and low business confidence are weighing on investment” in South Africa.
“Growth in South Africa is projected to recover from 0.6% in 2017 to 1.5% in 2018-19,” it said. “A rebound in net exports is expected to only partially offset weaker than previously forecast growth of private consumption and investment, as borrowing costs rise following the sovereign rating downgrade to sub-investment level.”
The World Bank said “subdued long-term outlook for commodity prices is expected to keep investment rates in commodity exporters well below the high rates achieved during the pre-2014 commodity boom.
“In this context, growth in regions with large numbers of commodity exporters will strengthen in 2017, but at a slower-than-expected pace.”
Growth in Sub-Saharan Africa is forecast to pick up to 2.6% in 2017, and average 3.4% in 2018-19, slightly above population growth. “The recovery is predicated on moderately rising commodity prices and reforms to tackle macroeconomic imbalances,” it said.
“The upturn reflects recovering global commodity prices and improvements in domestic conditions. Most of the rebound will come from Angola and Nigeria – the largest oil exporters.
However, investment is expected to recover only very gradually, reflecting still tight foreign exchange liquidity conditions in oil exporters and low investor confidence in South Africa. Fiscal consolidation will slow the pace of recovery in metal exporters.”