Picture: ISTOCK
Picture: ISTOCK

SA’s economy will have a slow rebound in 2019 and policy uncertainty will persist till the 2019 election, according to Fitch Solutions Macro Research, a subsidiary of the Fitch Group.

While economic growth will continue to slow in 2018, on the back of falling agricultural sector output and rising inflation, “the growth outlook will brighten modestly in 2019,” said the research group in a report published on Thursday.

Fitch Solutions revised down its growth forecast from 1.3% to 0.7% for 2018, in line with the Reserve Bank’s forecasts. The 2019 forecast has also been revised down from 2.1% to 1.7%. A rebound in 2019 is expected as headwinds from the agricultural sector ease.

Importantly, Fitch Solutions is separate from credit rating agency Fitch Ratings.

“While the government has taken steps to reassure investors and domestic businesses as part of a wide-ranging stimulus programme, policy uncertainty is likely to persist ahead of the 2019 election, which will only be exacerbated by more challenging external dynamics,” reads the report.

Policy uncertainty is likely to persist ahead of the 2019 election, which will only be exacerbated by more challenging external dynamics.

Echoing the World Bank on Wednesday, Fitch Solutions said President Cyril Ramaphosa's economic stimulus package would have a “limited” effect.

The plan was announced following shock statistics that showed SA had entered a recession in the second quarter for the first time since the global financial crisis.

Ramaphosa’s plan encompasses growth-enhancing reform, reprioritising public spending to create jobs, setting up an infrastructure fund, improving education and health and investing in municipal social infrastructure.

The biggest challenge of all remains the political environment ahead of the mid-2019 general election, Fitch Solutions said.

“Ramaphosa has taken pains to balance the demands of his domestic constituents while attempting to shore up confidence among foreign investors. However, we believe that maintaining the balance will become increasingly untenable as the election approaches,” the report warns.

“In an environment of weak growth, and with little scope for significant fiscal or monetary stimulus, we believe that there will be increasing pressure on the government to appeal to voters through more populist rhetoric or policy promises.”


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