ECONOMIC WEEK AHEAD: Cyril Ramaphosa on a mission to Davos to attract investment
Ramaphosa says SA is in a stronger position given a united front of business, the government and labour
Key economic indicators are forecast to show an improvement this week as a South African delegation led by President Cyril Ramaphosa descends on the World Economic Forum (WEF) in Davos, Switzerland, with the hope of attracting new investment.
The WEF kicks off in a wintry Davos on Tuesday and about 3,000 delegates comprising political, business and civil leaders will converge under the theme “Globalisation 4.0: Shaping a global architecture in the age of the fourth industrial revolution”. The WEF concludes on Friday.
Ramaphosa told reporters in a pre-WEF briefing on Thursday that SA was in a stronger position given a united front of business, the government and labour.
Further positive news this week is that inflation is forecast to have retreated in December following a marginal uptick to 5.2% in November. The Consumer Price Index inflation data will be published on Wednesday.
This comes a day after the Reserve Bank publishes its leading indicator, which is a dipstick to gauge the business cycle in the economy.
FNB chief economist Mamello Matikinca-Ngwenya expected inflation to have eased to 4.5% year-on-year in December due to the R1.84/l decline in fuel prices.
“Lower oil prices should contain inflation well within the [Reserve Bank’s 3%-6%] target in the year ahead,” Matikinca-Ngwenya said. FNB expects inflation to average 4.6% for the year and for core inflation to stabilise at 4.4% in 2019.
Inflationary pressures are expected to moderate. Food inflation, a significant component of the CPI basket, is forecast to have stabilised at 2.8% y/y in December. However, a marginal rise in rentals and owners’ equivalent rent may provide inflation risk to December inflation.
Elize Kruger, a senior economist at NKC African Economics, expected inflation to average 4.8% for 2019 with the inflation outlook “signaling no imminent need for further monetary policy tightening in the short to medium term”.
But a volatile exchange rate may reignite inflationary pressures.
Tumisho Grater, economic strategist at Novare, said: “The trajectory of the rand exchange rate remains vulnerable to both domestic and international factors. This year policy uncertainty from a political, monetary, fiscal and trade perspective is likely to see the local currency display a fair amount of volatility.”
Another key signpost for economists is the FNB/Bureau for Economic Research consumer confidence index for the fourth quarter of 2018. The index will be published on Thursday.
Economists surveyed by Bloomberg ahead of the index release expect a reading of 10, an improvement from the third quarter result of seven.
The index can vary between -100 and 100 but it has fluctuated between -33, which indicates an extreme lack of confidence, to above 23, which shows extreme confidence. The average of the index is +2 and is regarded as the neutral level.