ECONOMIC GROWTH FORECASTS
The 2020 outlook: a little better with lots of the same
Views from global finance institutions, credit ratings agencies and asset managers
SA Reserve Bank — not at the bottom yet
The Reserve Bank projects that in 2020 the economy will grow by 1.4%. This is a substantial revision of the view it held this time in 2018, when it projected 2% growth for 2020. The downward revision shows just how weak the economy has turned out to be in 2019. The Reserve Bank also says that its gauge of future economic activity — based on indicators such as approved building plans and job advertisement space — has not yet shown any sign that the economy has reached the bottom of the cycle. — Carol Paton
IMF — People will get poorer
The IMF predicts that economic growth in 2020 will be “sluggish” and “below population growth”, which stands at about 1.6%. This highlights the serious danger of SA’s slow growth: in 2020 — just as was the case in 2019 — South Africans got poorer on a per capita basis.
World Bank — still gloomy
The World Bank projection for 2020 is that the SA economy will grow by 1% in 2020, a significant downward revision on its earlier projection of 1.7%. Like the IMF, ratings agencies and investor advisory services, the World Bank has joined the chorus to urge SA to make faster and more urgent progress on economic reforms as one of the few options available to policymakers to encourage growth.
Institute of International Finance — less pessimistic than before
The IIF, which is a global association of financial institutions, says that it expects growth of 1% in 2020. On the upside, the institute says it was somewhat cheered after a recent trip to SA and less pessimistic than previously. In particular, it says it was encouraged by the government’s final resolution on SAA, allowing it to go into business rescue. That said, its growth prediction for 2019 is the lowest of all at 0.3% and the IIF also sees as likely a credit ratings downgrade in 2020, possibly as early March or April.
March 27 and November 20 are the two dates that Moody’s has set down to pull the trigger (or not)
Moody’s Investors Service — D-Day is March 27
Most important of all for 2020 will be the view of credit ratings agency Moody’s, which holds in its hands the power to relegate SA to junk status. As the last ratings agency with SA on investment grade it has effectively given the government until February’s budget to show progress or have its debt lose investment grade status.
In November Moody’s affirmed SA’s long-term foreign and local currency debt ratings at Baa3 — one notch above junk — but revised the outlook to negative from stable. March 27 and November 20 are the two dates that Moody’s has set down to pull the trigger (or not).
Fitch — sadly negative
Credit ratings agency Fitch expects growth of 1.5% in 2020. SA remains on negative outlook with Fitch, which has warned that failure by the government to form a credible plan to stabilise government debt — exacerbated by bailouts for troubled state-run firms such as Eskom — could prompt a downgrade.
S&P Global — also in negative territory
The credit ratings agency that downgraded SA to junk status in 2017 changed its outlook on SA’s sovereign credit rating from stable to negative late in November, citing ailing growth and the government’s worsening fiscal and debt trajectory. This increased the likelihood that S&P will further downgrade SA in the coming months.
S&P said it could lower the rating if there is “continued fiscal deterioration”, due to higher pressure on state spending, rising interest costs or the crystallisation of contingent liabilities related to state-owned enterprises (SOEs), especially Eskom.
Deutsche Bank — almost cheerful
Deutsche Bank, one of the world’s largest investment banks, is feeling much cheered about SA. Real progress has been made on economic reforms, including a revival of infrastructure projects and industrial policy initiatives, it says. There has also been progress in cleaning up government corruption and an increase in investment pledges. The bank’s 2020 growth forecast is 1.1% and, it says, a downgrade is not likely within the next 12 months.
Intellidex — too slow for lift-off
Growth is expected to be sluggish, rising to a weak 1.1% in 2020. This could be easily derailed by further load-shedding, says the investor advisory service. The pace of forward momentum on reforms, while positive, will be too slow to meaningfully lift growth. Fiscal consolidation will be minimal and the theoretical room to cut interest rates by the Reserve Bank will not be taken up — at least at the start of the year. A credit ratings downgrade by Moody’s Investors Service is expected but its impact is likely to be contained and not disorderly.
Momentum Investments — tepid recovery
The asset manager expects growth of less than 1% for 2020. A sovereign downgrade by Moody’s is probable should the government fail to execute wage bill cuts and the sale of non-core assets and, as a last resort, revenue measures.