2013-02-28 15:04:19 - Fast Market Research recommends "South Africa Business Forecast Report Q2 2013" from Business Monitor International, now available
BMI sees the South African economy continuing its uneven recovery over the medium term, with real GDP expected to grow by just 2.8% in 2013. Although the consumer sector is relatively robust, the supply side is lagging behind and there are widespread concerns that the recovery is not sufficiently broad-based. A key downside risk stems from industrial unrest in the mining sector.
We forecast that South Africa's repo rate will be kept steady at 5.00% over the medium term. That said, there is a risk that rates will be cut. Growth is slowing, and risks are to the downside given the volatile political risk environment. On balance, however, we expect the South African Reserve Bank to 'hold fire' given that
inflation is trending upwards, albeit mildly.
Political risk is heightened amid industrial unrest in the mining and agricultural sectors. Furthermore, there is an ongoing debate regarding nationalisation of key industries including mining. However, we do not see nationalisation as an imminent threat.
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Major Forecast Changes:
We have revised down our forecast for real GDP growth in 2013 to 2.8% from 3.3% previously, owing to a weaker outlook for private consumption and investment following the 'Marikana Massacre'.
Key Risks To Outlook:
A sustained bout of global risk aversion with an attendant sharp outflow of portfolio funds. This would threaten South Africa's precarious balance of payments.
A sudden uptick in domestic political risk, such as an escalation of the industrial unrest blighting various sectors at present.
A sustained period of high oil prices would exacerbate the alreadysizeable current account deficit.
Partial Table of Contents:
Major Forecast Changes:
Key Risks To Outlook:
Chapter 1: Political Outlook
BMI Political Risk Ratings
Zuma's Victory Augurs For More Of The Same
- The victory of President Zuma at the African National Congress's internal elections means that he will likely be re-instated as president of South Africa in 2014, and policy continuity will be maintained. However, that is not necessarily a positive development, since it augurs for more of the indecision and policy uncertainty that has characterised his leadership to date.
TABLE: SOUTH AFRICA POLITICAL OVERVIEW
Long-Term Political Outlook
Trials And Tribulations Over The Coming Decade
- Many issues threaten South Africa's political stability over the long term, not least the inequalities still stemming from the apartheid era and the foreign policy challenge of Zimbabwe. Although our core scenario envisages no major change to the political backdrop, we present a number of alternative scenarios.
Chapter 2: Economic Outlook
BMI Economic Risk Ratings
Economic Activity I
Subdued Outlook For Growth
- We expect the South African economy to post sluggish growth over the medium term, forecasting that real GDP will expand by 2.8% in 2013 and 3.4% in 2014. Although private consumption should hold up fairly well, investment is likely to suffer due to elevated political risk.
TABLE: REAL GDP GROWTH
TABLE: ECONOMIC ACTIVITY
Economic Activity II
On The Ground: Assessing The Post-Marikana Landscape
- Following a trip to South Africa in mid-October 2012, we have revised downward our forecasts for real GDP growth, and are now projecting growth of 2.3% in 2012 and 2.8% in 2013, compared with previous estimates of 2.5% and 3.3% respectively. The wave of industrial unrest seen over recent months highlights various structural faultlines in South Africa's risk profile, which will weigh on investment over the coming years.
Rate Hold Scenario For 2013 Gains Traction
- We hold to our view that the South African Reserve Bank will keep the repo rate on hold at 5.00% over the coming 12 months at least. Although domestic growth is weak, inflation is heading higher and risks are firmly to the upside. Amid this stagflationary scenario, the Monetary Policy Committee will likely choose to maintain the status quo.
TABLE: MONETARY POLICY
Budget Deficit Widening, But Under Control
- We forecast that South Africa's budget deficit will widen to 4.9% of GDP in fiscal year 2012/2013, owing to an elevated public sector wage bill and sluggish growth in revenues. Thereafter, we expect the budget shortfall to narrow gradually as revenue growth picks up, provided that the Treasury is successful with its plans to keep a tight rein on expenditure.
TABLE: FISCAL POLICY
Chapter 3: 10-Year Forecast
10-Year ForecastsStructural Constraints To Curb Long-Term Growth
- While we forecast relatively stable real GDP growth rates over the coming 10 years, ongoing structural shortcomings will continue to limit South Africa's long-term growth potential. High unemployment and powerful trade unions present key challenges to the authorities.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Business Environment
BMI Business Environment Risk Ratings
Business Environment Outlook
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
TABLE: BMI LEGAL FRAMEWORK RATING
TABLE: LABOUR FORCE QUALITY
TABLE: TRADE AND INVESTMENT RATINGS
TABLE: AFRICA - ANNUAL FDI INFLOWS
TABLE: TOP EXPORT DESTINATIONS, 2002-2009
Chapter 5: Key Sectors
Defence & Security
Other Key Sectors
TABLE: INFRASTRUCTURE SECTOR KEY INDICATORS
TABLE: AUTOS SECTOR KEY INDICATORS
TABLE: FOOD AND DRINK SECTOR KEY INDICATORS
TABLE: PHARMA SECTOR KEY INDICATORS
TABLE: TELECOMS SECTOR KEY INDICATORS
TABLE: DEFENCE AND SECURITY SECTOR KEY INDICATORS
Chapter 6: BMI Global Assumptions
Full Table of Contents is available at:
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