The South African economy is growing faster—but how fast?

The South African economy has been off to a good start in 2018. Statistics SA, the country’s national statistical service, released national accounts figures with revisions that pointed to more positive momentum in the economy than previously thought. South Africa grew by 1.3% in 2017, beating the consensus estimate of economists, and the revised numbers no longer record a technical recession early in the year.

Confidence is up in 2018, as the new political leadership under President Cyril Ramaphosa has demonstrated a strong commitment to strengthening institutional integrity—especially in state-owned enterprises—reaching out both to business and labor, and pronouncing his intention to build a new social compact in the country. Finally, the 2018 budget returned to the government’s long-standing commitment to fiscal consolidation, which appeared to have been temporarily abandoned in the 2017 Medium-Term Budget Policy Statement. Business and consumer confidence is up, and market appetite for South African securities strengthened. The rand strengthened by about 12% since the African National Congress (ANC) elective conference and 10-year government bond yields are down to levels last seen in 2015, reducing borrowing costs.

Fueled by the confidence boost—and much more benign inflation—South African growth is expected to accelerate. Many economists, including those at the World Bank, have revised their growth forecasts upwards. In its latest publication, the 11thedition of the South Africa Economic Update, the Bank predicts growth of 1.4% in 2018 and 1.8% in 2019 (previous estimates were 1.1% and 1.7% respectively). The estimates are on the conservative side. This is largely owed to the fact that confidence still needs to translate into consumer spending, which may be weighed down by the revenue measures of the 2018 budget, and into investment.

BY Marek Hanusch.

Full story at World Bank.