South Africa: Gold at the end of the rainbow?

Consenus sees economic growth gaining traction in South Africa next year amid broad-based improvements. Fiscal challenges, however, remain high and could worsen if Eskom needs yet more funds. This accounts for the significant spread among our panelists' projections

focuseconomics_southafrica_jan_2020_0.png

Bar their recent triumph against old foes England in Japan’s rugby world cup, there has been little to cheer about in South Africa this year.

After dodging recession in the second quarter, the economy undershot market expectations and contracted in the third quarter as a series of breakdowns in Eskom’s coal power plants triggered the return of rolling blackouts. Moreover, the economy likely remains in the doldrums in the fourth quarter given the rolling blackouts reached an unprecedented level in early December after more than a quarter of the country’s generating capacity broke down. As a result, large platinum and gold miners were forced to halt operations on 9 December, while small business owners were forced to use expensive generators, both of which will have hampered year-end economic activity.

Fitch Ratings, Moody’s and S&P Global Ratings all have a negative outlook on the country’s long-term foreign currency ratings. Nevertheless, as highlighted by the chart below, Consensus sees growth gaining traction next year amid broad-based improvements. Particularly, household spending is seen rising more rapidly; fixed investment is set to rebound amid improved investor sentiment and favorable monetary conditions; while a weaker rand should boost exports. Fiscal challenges, however, remain high and could worsen if Eskom needs yet more funds. This accounts for the significant spread among our panelists’ projections, with the most pessimistic forecast projecting the economy to flatline next year and the most optimistic forecast projecting economic growth accelerating to 1.8%.

 


product_launch_2_0.jpg                                                                                                                           Download sample


 

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinion of FocusEconomics S.L.U. Views, forecasts or estimates are as of the date of the publication and are subject to change without notice. This report may provide addresses of, or contain hyperlinks to, other internet websites. FocusEconomics S.L.U. takes no responsibility for the contents of third party internet websites.

Author: William O'Connell, Editor

Date: December 20, 2019

Twitter @FocusEconomics

  • Switzerland: KOF economic barometer hits historic low in May https://t.co/tnBDAqDWfh

    1 day ago

  • United States: Second estimate confirms economy contracted at sharpest rate in over a decade in the first quarter https://t.co/8uHoj3yzQd

    1 day ago

  • Spain: Current account balance swings to deficit in March https://t.co/fp80tVUY55

    1 day ago

  • Poland: Central Bank slashes rates to fresh all-time low in May; reaffirms quantitative easing https://t.co/orz5N3OiF9

    1 day ago

  • Poland: Growth weakens to over-six year low in Q1 but economy shows resilience https://t.co/FtYN0LBAmw

    1 day ago

Blog archive

Search form