While growth in economic activity plunged in the first quarter, it is expected to recover in the remainder of the year – and beyond, says the research team at financial services group Momentum.
After growing by 3.1% in the fourth quarter of 2017, the country’s economy wobbled in the first quarter of 2018, shrinking by 2.2% quarter-on-quarter, data from Stats SA showed in June.
Rising petrol prices, fresh blackouts from Eskom, cash strapped state entities, and a stubborn unemployment rate, continue to hamper GDP growth.
Business sentiment and a weaker rand have wiped out all the gains made since the appointment of president Cyril Ramaphosa to the top position of the ruling party, the ANC, in December.
The rand continued to be on the back foot in trade on Monday:
- Dollar/Rand: R13.81 (0.64%)
- Pound/Rand: R18.12 (0.27%)
- Euro/Rand: R16.06 (0.44%)
The rand, Momentum said, was under pressure again in June. The local unit weakened 7.8% against the dollar, and slumped 6.8% against the euro. The currency had the fourth worst performance against the dollar on a year-to-date-basis (9.2%), with the Brazilian real, Turkish lire, and Argentine peso weaker.
However, Momentum said it expects growth to pick up again for the remainder of the year. “Momentum Investments expects growth in real economic activity to recover from 1.3% in 2017, to 1.7% in 2018, 2.1% in 2019, and 2.4% in 2020.
“Household consumption should remain solid in light of positive real wages, wealth effects and moderate recovery in employment,” it said.
Fixed investment is expected to stage a significant recovery in 2019 and 2020, following the national elections, which is expected to bring about more policy certainty, as it has been the major driver behind the postponement in fixed investment projects, locally.
“Growth in exports should continue to expand, in line with healthy global growth, but a potential downswing in global economic activity in 2020 – prompted by a reversal in the positive fiscal impulse, which is a contributor to growth – could see growth in exports taper off in 2020,” it said.