SA growth forecasts trimmed further
Economists and analysts continue to trim SA's growth forecasts lower, while government is also expected to do the same, following recent comments by Finance Minister Pravin Gordhan that current growth forecasts for 7% per annum are "far too ambitious".
Although some economists who spoke to BusinessLIVE expected a slowdown in economic activity, they said a recession was not on the cards for the local economy at this point.
Monthly data in SA's main sectors such as manufacturing, mining production and retail were already suggesting the slowdown was indeed underway.
Colen Garrow, economist at Brait, said while the consensus GDP for 2011 was at 3.3%, there were too many factors counting against an outcome "as optimistic as this". Garrow forecast a GDP growth of 2.8% for 2011, 3.4% in 2012, and 3.5% in 2013.
SA GDP slowed to 1.3% in the second quarter from 4.5% in the first quarter.
"As poor as these numbers are, they many get even worse, taking into account the strikes and the latest global market crisis, both of which gained traction in July," Garrow said.
"GDP growth in Q3 is unlikely to be much better than Q2. The July level of output in manufacturing, mining and electricity was below the Q2 level by -5.4%, -6.8% and -4.2% respectively," said Matthew Sharratt, Bank of America/Merrill Lynch economist.
Michael Grobler, fixed income analyst at Afrifocus Securities told I-Net Bridge/BusinessLIVE that the SA Reserve Bank's 2011 3.5% growth forecast, and the 3.8% of the National Treasury were "too optimistic" and expected these to be revised downward "in the next two months."
"We believe the slowdown in Europe will impact to slow SA growth further as external factor however with a lag which will only be visible in Q1 or Q2 2012," said Grobler. He added they would be "surprised" if SA GDP growth was weaker than 2.5% or higher than 3.1% in 2011.
SA's growth picture was not bright against a backdrop of a soft global economy, Arthur Kamp, economist at Sanlam Investment Management said.
Kamp said they previously anticipated moderation in global GDP growth from the strong pace recorded in the first quarter.
"But, the subsequent slowdown has been stronger than anticipated, which made a downward revision to our domestic growth forecast inevitable," he noted.
Much of SA's own growth would depend on developments in Europe, for which the outlook was highly uncertain, Kamp said, adding that it was difficult for the region to stabilise and reduce debt levels in the current environment of weak income growth.
"The outcome we hope for is one of decisive action from leaders and policymakers to pave the way for the recapitalisation of banks and restructuring of sovereign debt where necessary, with continued support from the European Financial Stability Facility (EFSF) and ECB," he said.
The negative growth prognosis was also leading to questions over whether or not SA's employment targets of five million jobs over the next ten years would be achieved.
Garrow said the target remained ambitious.
The SA government earlier growth forecasts are widely expected to be trimmed down when Gordhan delivers the Medium-Term Budget Policy Statement on October 25.
