Picture: REUTERS
Picture: REUTERS

The Old Mutual Investment Group is confident the rebound in the economy in the second half of the year will be strong enough to see growth of almost 1%.

“A gradual upward move in growth is expected because of structural reforms, but our debt to GDP is still ballooning,” the group's chief economist, Johann Els, said at a media briefing on Wednesday in Sandton.

Despite a steep contraction in the first quarter of 2019, slower than expected policy reform and negative news around National Health Insurance, Eskom and the debt relief bill, Old Mutual Investment Group has not revised down its growth forecasts for this year or next.

The group expects growth of 0.9% in 2019, rising to 1.8% in 2020. This is higher than the Reserve Bank's forecast of 0.6% in 2019 but in line with the Bank's forecast for 2020.

Johann Els. Picture: PUXLEY MAKGATHO
Johann Els. Picture: PUXLEY MAKGATHO

Higher growth will largely be based on the rebound in consumer spending and private-sector fixed investment spending.

“Despite delays, the ‘winds of change’ investment theme is still alive,” Els said.

“The next five years are still expected to be better than the past five years but urgent reforms are crucial,” he said.

Of importance in the next few months are the plans on Eskom which is expected to be released this month, the medium-term budget policy statement in October, which would need to show expenditure cuts, and Moody's Investors Service's credit rating decision expected on November 1.

“There's room for expenditure cuts that won't hurt growth,” Els said.

He expects cuts of R42.9bn in 2019 and R54.7bn in 2020, which would bring down the projected deficit to about 5% from close to 6% currently expected.

This comes after Moody's said on Tuesday that SA was safe from a credit-ratings downgrade for the next 12-18 months.

menons@businesslive.co.za