Headwinds Growing For Economy
BMI View: We are below-consensus, forecasting that South Africa's economy will growth by just 2.5% in 2014 (versus Bloomberg consensus of 3.0%). Our view is predicated on several concerning factors including the slowdown in China and ongoing retrenchment in the domestic gold mining sector.
The prospects for South Africa's economy are deteriorating and we have revised down our forecasts since our last quarterly update. Previously, we were forecasting real GDP growth of 2.3% in 2013 and we have since adjusted this marginally to 2.2%. For 2014, however, we have made a more substantial revision from 3.3% to 2.5%. This places us right at the bottom of the range of forecasts collated by Bloomberg, and we are significantly below consensus, which currently stands at 3.0%.
Several factors bode ill for growth: lower gold prices, an associated retrenchment in the mining industry, strike activity, the slowdown in China and the likelihood of higher interest rates. On a more positive note, the consumer sector is broadly holding up and the manufacturing sector is gaining some tailwinds from the weak rand which makes exports more competitive abroad. Overall, however, we believe that growth will remain fairly lacklustre over the medium term, averaging around 3.0% over the next five years.
|South Africa - Bloomberg Consensus Forecasts For Real GDP Growth, %|