How 27 Global Banks Rate South Africa’s Economic Growth Prospects For 2016
Consensus among 27 global banks and financial analysis groups shows that South Africa’s economy is expected to grow by 0.7 percent in 2016, according to a new economic report by Focus Economics, BusinessTech reported.
Things will be a bit better in 2017, with the economy expected to grow about 1.4 percent.
Focus Economics provides economic analysis and forecasts for 127 countries in Africa, Asia, Europe and the Americas, as well as price forecasts for 33 commodities. The company is supported by a global network of analysts.
New York City-based investment banking firm Goldman Sachs is the bank most optimistic about South Africa, predicting a growth rate of 1.5 percent.
Colin Coleman, international managing director for Goldman Sachs, said the securities management firm is bullish on South Africa because of the relative lack of competition from other emerging markets and the depth of its capital market. It’s a favorable destination for fund managers, Coleman said, according to an April 2015 MiningWeekly report.
Despite South Africa’s self-inflicted local problems, Coleman said the country has the region’s deepest capital markets (measured as market capitalization of the Johannesburg Stock Exchange divided by gross domestic product.)
“South Africa has two times market cap to GDP, which reflects the liquidity and sophistication of the JSE, which is a very favorable destination to fund managers,” Coleman said a year ago.
By comparison, Germany’s largest bank, Deutsche Bank, rates South Africa the lowest out of 27 banks globally, projecting its economic growth for 2016 at 0.1 percent.
Deutsche Bank announced a year ago that it was merging its African business into its Middle East operations including South Africa and Nigeria with Dubai as the hub, Bloomberg reported. The bank was among advisers to Steinhoff International Holdings when the furniture chain agreed to buy Pepkor Holdings for $5.1 billion.
Another bank less optimistic about South Africa’s economic growth prospects in 2016 is New York City-based Citigroup, which pegged the country’s growth at 0.3 percent – the second lowest out of 27 banks globally.
Citigroup didn’t just slash its outlook for South Africa. It cut its 2016 global growth forecast from 2.8 percent to 2.7 percent and lowered its outlook for the U.S., U.K. and Canada, plus several emerging markets including Russia, Brazil and Mexico, CNBC reported in January.
Electricity, water supply shortages and low commodity prices continue to hold back South Africa’s growth, according to Focus Economics.
South African inflation eased from 7 percent in February to 6.3 percent in March, and is expected to remain relatively high with the weak currency and food supply shortages.
“Our panel projects inflation to average 6.5 percent in 2016 and 6.3 percent in 2017,” Focus Economic said, according to BusinessTech.
This is the ninth consecutive month that the Focus Economics panel cut its GDP forecast, BusinessTech reported. It now expects the economy to expand 0.7 percent in 2016, 0.1 percentage points lower than April’s estimate.
Here’s how 27 global banks rate South Africa’s economic growth prospects for 2016 and 2017: