Political scandals weighing on country’s economic growth‚ says report


Political scandals weighing on country’s economic growth‚ says report

Bekezela Phakathi | 2017-01-25 19:41:53.0

President Jacob Zuma.


Ongoing political scandals‚ the dire state of the labour market‚ and the potential effect of US President Donald Trump’s protectionist policies will weigh on the growth of the South African economy.

That’s according to a new report by FocusEconomics‚ an international organisation that provides economic forecasts and analysis.

SA is under political pressure as the ruling ANC prepares to elect new leaders at its conference in December. There has also been speculation that a cabinet reshuffle is imminent with President Jacob Zuma looking to replace Finance Minister Pravin Gordhan with outgoing AU commission chair Nkosazana Dlamini-Zuma. Dlamini-Zuma is seen as one of the frontrunners for the ANC presidency.

Rating agency Standard & Poor’s recently warned that any attempt to undermine SA’s key institutions such as the Treasury would see the country likely downgraded to junk status.

The FocusEconomics report‚ which was released this week‚ states that SA’s economy has been in the doldrums for a prolonged period due to subdued global demand and a myriad of political and economic problems.

“A weak labour market and high inflation took a toll on private consumption and the investment environment was undermined by the political infighting in the ruling ANC party‚” according to the report.

SA managed to avoid a credit downgrade late last year‚ causing analysts to give the government and its reform agenda the benefit of the doubt. However‚ according to FocusEconomics‚ it will not be long before investors and rating agencies want to see some tangible results.

“All eyes are now on the 2017 budget‚ which will be delivered next month [February]. Details on tax increases and the announcement of more restrictive fiscal policy are expected.”

On a positive note‚ the report states that a gradual improvement in the world economy and a recovery in commodity prices will support SA’s economy.

“On balance‚ the FocusEconomics panel expects GDP to expand 1.2% in 2017‚ which is unchanged from last month’s estimate. In 2018‚ growth is expected to accelerate to 1.8%.”

The reserve this week revised down marginally the growth forecast for 2017 to 1.1%‚ from 1.2%.

Reserve Bank governor Lesetja Kganyago said growth prospects remain dependent on uncertain but tentatively improving global conditions and their impact on commodity prices.

“While some improvement is anticipated over the forecast period‚ growth is expected to remain below potential‚” he said Tuesday.

-TMG Digital/BusinessLIVE

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