Modest but positive growth for SA in 2017

Cape Town – The South African economy is expected to grow by 1.3% in 2017, compared to last year’s modest 0.5%, said Finance Minister Pravin Gordhan in the 2017 Budget Overview. 

The growth outlook for 2018 improves even further to 2% as economic conditions strengthen, while 2019 could yield a 2.2% expansion. 

The factors that support the more optimistic forecast include marginally higher global growth, stabilising commodity prices, greater reliability of the electricity network, more favourable weather conditions, recovering business and consumer confidence, and improved labour relations.

“The positive trajectory marks a break with several years of declining growth,” Gordhan said. 

However, the projected rate of growth is not high enough to markedly reduce unemployment, poverty and inequality. Inclusive growth requires broad-based transformation to break down structural impediments to new economic activities, enable millions of black South Africans to generate income and raise per capita incomes across the board.

To realise small wins in the short term, South Africa needs to bolster business and consumer confidence to support higher levels of investment. Government can boost growth by improving policy certainty, safeguarding investment-grade credit ratings, and ensuring that the state meets its regulatory and service-delivery obligations, Gordhan said. 

He lauded the collaborative work done by government, business and labour to rebuild confidence and improve prospects for more inclusive growth. 

“The work of the Presidential Business Working Group and the CEO Initiative have led to improvements in the business registration process and the regulatory environment, and increased funding for small businesses and internships,” Gordhan said. 

Globally speaking

The International Monetary Fund projects the world economy to grow by 3.4% in 2017 and by 3.6% in 2018. 

Although the global economic outlook has improved, it is clouded by policy uncertainty in developed economies and risk to Chinese growth, which put extra pressure on the world trading system. 

The outlook for sub-Saharan Africa, a major export destination for South African manufacturers, has been revised marginally upwards to 3.7% for 2018, by and large as a result of a slight increase in commodity prices.

Growth in advanced economies is projected to remain around 2% over the medium term. In the US, the world’s largest economy, 2.3% growth is expected for 2017 and 2.5% in 2018. “This is premised on the introduction and success of a fiscal stimulus,” Gordhan said. 

Stronger growth in the second half of 2016 has led to upward revisions of forecasts for Germany, Japan, Spain and the UK.

Developing economies are expected to remain the principal contributors to higher global growth in 2017 and 2018. South Africa’s Brics partners Brazil and Russia should return to moderate growth following recessions in both countries, while growth in India is projected to remain above 7%. 

China’s growth forecast is lower compared to other years at 6%. The rapid expansion of credit and high levels of corporate debt pose a significant risk to growth in China. 

* Visit our Budget Special for all the budget news and in-depth analysis.