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SA Economic Outlook

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• Real GDP growth is expected to be 1.6% (revised down from previous estimates of 1.7%) in 2016, optimistically increasing to 2.1% in 2017.

• Inflation is likely to remain high in 2016, upward pressure on food prices and higher petrol inflation are expected to push CPI inflation above the 6% target ceiling in the first half of 2016. The forecast takes into account a 12.7 % per year increase in electricity prices.

• Weaker global growth prospects and slower growth in key emerging markets introduce a degree of uncertainty into the forecast, with volatility expected in capital markets and exchange rates.

• In its Economic outlook for 2016, the International Monetary Forum (IMF) indicated that SA was among the region’s largest economies whose growth would be negatively affected by lower commodity prices and higher borrowing costs. The IMF significantly cut SA’s economic growth outlook for 2016 from 1.3% to 0.7%, the lowest forecast on record so far.

• Borrowing costs will rise by 50 basis points at the January 28 policy meeting, according to the median estimate of 11 economists surveyed by Bloomberg. While that may support the rand, it could further damage the faltering economy.

• Expected increases in electricity supply from investments in generating capacity should raise supply only by 2017, easing constraints that have hindered production and increasing investor confidence.

• According to the Organisation for Economic Cooperation and Development (OECD), strengthening growth in major trade partners, such as Europe and the United States, should reinforce export growth.

Sources: FocusEconomics; MTBPS statement; iol; Business Tech

– By SABC research team

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