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Research Notes are more in-depth analyses undertaken by BER economists and consultants.
Brief note intended as a more regular interface with our clients.
In-depth analysis of important political developments in South Africa.
The Impumelelo Economic Growth Lab is a unit at the BER, focussing on generating policy-relevant work and capacity building to achieve economic success in South Africa. This work is freely available to access on our website.
The BER’s October 2015 baseline forecast was for GDP growth to remain tepid in 2016 with a number of downside risks. As we close in on 2016, this comment reflects on some of these risks in more detail.
Read MoreReal GDP recovered in line with expectations during 2015Q3, posting growth of 0.7% q-o-q (saar1). The modest growth follows the sharp 1.3% GDP decline in the second quarter. The implication is that SA avoided slipping into a technical recession, defined as two consecutive quarters of GDP decline. The Q3 figure was somewhat weaker than the market consensus of 1%, but in line with our view. Unlike preceding years, when the Q3 GDP data was accompanied by annual revisions to the previous figures, this has been postponed to March 2016 when the 2015Q4 data is set to be released. Stats SA also confirmed that, starting with the 2016Q1 GDP release (scheduled for early June 2016), they will present data on GDP from both the expenditure and production side in a single publication. The SA Reserve Bank will no longer be tasked with compiling the GDP expenditure figures.
Read MoreThe further decline in business confidence is generally in line with the underlying survey indicators. General business conditions remained depressed. Respondents mostly indicated further weakening of demand and hence activity measures. The Q4 results signals a further waning of year-on-year GDP growth.
Read MoreIn presenting his second Medium-Term Budget Policy Statement (MTBPS), Finance Minister Nhlanhla Nene had to incorporate the adverse revenue impact of a weaker GDP growth outlook. Furthermore, the Treasury was faced with the budgetary implications of the higher than expected public sector wage deal for the next three years. Against this backdrop, it was almost inevitable that the fiscal outlook would deteriorate. Indeed, while the figures for the current (2015/16) fiscal year are largely similar to those presented in February, the key fiscal parameters have worsened over the medium term. This is reflected in higher budget deficits, more elevated government debt levels and (relative to the February outlook) an increased borrowing requirement.
Read MoreThe surveys painted a picture of weak domestic demand, pressure on costs and hence profitability, increased uncertainty, and a downscaling of fixed investment as well as employment. This is not promising for the overall economic outlook in Q3 and beyond. At this stage, the BER is not forecasting a technical recession for Q3, but there is scope for a slowdown in GDP on a year-on-year basis. However, a recession could be on the cards should strike action or closures hit mining or manufacturing activity.
Read MoreThe probability of a bad end to the Greek debt impasse has increased notably over the past week. SA’s trade links with Greece are limited, which should shield the country against a further decline in Greek GDP. The concern is rather about financial market and confidence spillovers that have the potential to weaken the rand exchange rate and depress domestic equity and bond markets.
Read MoreThis note summarises the insights from the latest round of BER surveys in the trade, manufacturing and building industries. The RMB/BER Business Confidence Index (BCI) declined to 43 in 2015Q2 and there seems to be a high degree of uncertainty among respondents. Business conditions and activity deteriorated across the building, manufacturing and retail sectors. Trading conditions are clearly tough and even higher percentages of respondents rated insufficient demand as a constraint during the quarter. In terms of the 2015Q2 GDP reading, the quarter-on-quarter (q-o-q) growth rate is likely to decline slightly in line with lower confidence levels and average activity levels.
Read MoreThis note summarises the insights from the latest round of BER surveys in the trade, manufacturing and building industries. Business confidence declined by two index points to 49 in 2015Q1. However, the slight decline in the overall confidence level masks the swing in favour of the trade sector. The underlying survey results substantiate the relative outperformance of the retail trade sector, while it is clear that manufacturing production has not ramped up further (as was the case in 2014Q4 in the aftermath of the metal industry strike during the previous quarter) and activity in the building sector stalled. In terms of the implications for the 2015Q1 GDP reading, the quarter-on-quarter (q-o-q) growth rate is expected to decline in line with lower confidence levels. Furthermore, it is likely that the consumer sectors will make the largest contribution to growth in the quarter.
Read MoreIn his first main Budget address, Finance Minister Nhlanhla Nene followed through on earlier warnings of the need for fiscal consolidation. He announced a rise in the country’s net tax burden. This includes a 1% hike in the marginal tax rates of all taxpayers earning more than R180,000 per annum, as well as a hefty increase in the fuel and road accident fund (RAF) levies. On the expenditure side, the minister reiterated government’s commitment to limit the real growth in government expenditure to low single digits.
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