ECONOMIC WEEK AHEAD: Confidence falling ahead of state of nation address
Close attention will be paid to the president's speech for much-needed signs of growth
It’s likely to be a quiet week on the economic front, with little other than the business confidence index (BCI) expected, but close attention will be paid to President Cyril Ramaphosa’s state of the nation address on Thursday.
After rising to record highs a year ago on Ramaphosa’s election, the SA Chamber of Commerce & Industry (Sacci) business confidence index eased in the past few months.
Confidence fell slightly in December, given the lack of progress in economic performance, dropping 0.9 points to 95.2 in December, from 96.1 in November 2018.
“In comparing December 2018 to December 2017, the task of restoring the business and investor climate remains a major challenge,” Sacci said at the time.
“It became apparent that it will take longer to put the economy back on an upward trajectory due to structural and prolonged erosion of administrative capacity and competence to the economy inflicted earlier.”
The BCI, which will be released on Wednesday, is expected to show that confidence has remained subdued. But that may change later in the year.
“We are anticipating an increase in policy and political certainty post the 2019 national elections. This, coupled with a moderate tick up in growth for the year, should propel a lift in confidence,” Investec economist Lara Hodes said.
This comes after Ramaphosa said last week that SA can achieve economic growth of at least 5% if policy uncertainty is removed and regulatory frameworks are reviewed.
“We must remove the obstacles and constraints for growth. SA must go and grasp that high growth. We can do so by working together and addressing the issues,” he said.
The state of the nation address on Thursday will provide greater insight into how this growth will be achieved.
SA’s GDP growth rate averaged 2.77% from 1993 to 2018. The International Monetary Fund forecast the country’s economy to grow 1.4% this year, from 0.8%.
“Given that a lot of footwork has been done since Ramaphosa took over last year, we hope to see that some of the recent initiatives, including an economic stimulus plan, a jobs summit and an investment summit held in the fourth quarter of 2018, gain momentum in the second half of the year,” said NKC economist Elize Kruger.
“Though the economy is clearly not out of the woods yet, even slow progress could support a much-needed improvement in household and corporate confidence levels, which could trigger positive momentum in both household spending and corporate fixed investment spending.”