04 Jan 2018

Macro-economic outlook 2018–2023

Annabel Bishop

Chief Economist

Global growth is expected to strengthen somewhat further; for SA’s growth free market policies are key

Figure 1: Summary, % real growth rates

South Africa has seen a substantial improvement in the exchange rate, bond yields and JSE on the outcome of 2017’s ANC elective conference in late December, with the rand strengthening from R13.53/USD, R15.93/EUR and R18.16/GBP to R12.24/USD, R14.59/EUR and R16.42/GBP, the yield on the R186 improving from 9.28% to 8.47%, and the JSE gaining almost 3000 points. Financial markets favour Cyril Ramaphosa as president of the ANC (and SA), as it is perceived that he will deliver good governance, eradicate corruption, and follow economic policies that support economic growth and lean towards the free market approach. The rand, and SA’s financial market indicators generally, have strengthened into the up case trajectory (see Rand note: the domestic currency has strengthened on relief SA was not downgraded by Moody's, growing market expectations of a Cyril Ramaphosa ANC election win and the fiscal consolidation newly mooted by National Treasury, 5th December 2017, see website address below). Jacob Zuma remains President of the country, and as such determines who enacts policies and policy proposals, which in turn have an impact both on economic growth and sentiment levels. The economy (as opposed to the financial market indicators) is not expected to run in the up case this year or the first half of next year as little is anticipated to change in that period to meaningfully spur economic growth and sentiment.

Figure 2: PPP value of the rand vs USD, GBP & JSE vs SA bond yield
Figure 3: Gross Fixed Capital Formation

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