SA expected to show higher growth

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JOHANNESBURG – South Africa’s economy is still expected to grow at an accelerated pace this year, despite indications that growth contracted in the first quarter of the year.

The Organisation for Economic Co-operation and Development (OECD) is the latest multinational group to back South Africa’s growth outlook for 2018.

The OECD in its latest economic outlook report said economic growth was set to strengthen in 2018/19, driven by increased business and consumer confidence.

“A change in the political environment marked a positive turning point for business and consumer confidence,” the OECD said.

“Investment is picking up after three years of decline. The currency has stabilised, following an initial period of strengthening after the change of power in the ruling party.”

The organisation said that it expected the economy to grow 1.9percent this year and by 2.2percent next year.

Revised up

The South African Reserve Bank last month said its growth forecast was unchanged at 1.7percent for 2018, but had been revised up from 1.5percent to 1.7percent for 2019.

The World Bank earlier this year said that it expected South Africa’s economy to grow 1.8percent next year and 1.9percent in 2020. The bank’s previous estimates were 1.1percent growth for this year and 1.7percent.

Mamello Matikinca, FNB chief economist, said she expected much of the weakness to stem from the mining and manufacturing sectors, while a disappointing retail trade number might put a further damper on growth.

“Nevertheless, our calculations suggest that a small contraction in (gross domestic product) will not derail our 2018 growth forecast of 1.9percent as the quarterly year-on-year number will remain positive,” Matikinca said.

Mining and manufacturing data in the first quarter came in soft, indicating that the economy was strong in the first quarter, following a buoyant fourth-quarter growth.

The Reserve Bank has already warned that the economy had contracted in the first three months of the year.

Statistics South Africa is expected to release first quarter GDP growth tomorrow.

John Ashbourne, an economist at Capital Economics, said indications were that growth had weakened in the first quarter.

“Activity data suggest that conditions have deteriorated in recent months, and that GDP may have actually contracted in the first quarter,” Ashbourne said.