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The SA Daily 05 December 2018

Abiding growth concerns

  • SA has exited the H1:18 recession, with Q3:18 GDP recording 2.2% q/q (saar), from an upwardly revised -0.4% q/q (previously -0.7% q/q) (saar) in Q2:18. The rebound was broad-based — but risks to growth persist.
  • On the production side, the biggest rebound came from the manufacturing and agricultural sectors (both had contracted in H1:18). The sectors contracting in Q3 were mining, construction, and electricity.
  • On the expenditure side, there was a rebound in consumption, but ‘compensation to employees’ does not look promising. Further, private sector investment remains in contraction, and government investment, mainly on infrastructure, contracted steeply.
  • Downside risks remain a worry; we therefore downwardly revise our GDP forecasts for 2018 and 2019 to 0.7% and 1.7% respectively (see 3Q18 GDP: 2.2% QoQ, as expected of 04 December 2018, by Elna Moolman).
  • SA assets (including equities, bonds and the rand) rallied after the Q3:18 GDP data. However, gains have since reversed.
  • We keep our rand and bond forecasts unchanged: we see the rand at R14.00/$ year-end, and SA’s benchmark R186 bond at 9%.

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