South Africa’s (SA’s) financial stability has been rocky to say the least with many South Africans feeling the burden of inflation, soaring fuel prices, the recent repo rate hike and last year’s VAT increase.
Economic recovery in 2019 will depend heavily on private investment and public private partnerships in SA. With local politics improving, investment opportunities can pick up in SA in 2019. Majority of analysts said that they expect improved confidence and a pickup in growth after the elections, bringing increased local investment opportunities.
Old Mutual Investment Group chief economist, Johann Els, stated as reported in Business Tech. “Consumer fundamentals aren’t currently that bad and are likely to improve as confidence improves, as well as being in line with cyclical economic pickup. In addition, investment could rise sharply again leading to growth possibly reaching 3.0% to 3.5% by 2021/2022.”
Regarding inflation and interest rates, Els believes that the deflationary environment is likely to last for a while, with the consensus facing a downside inflation forecast risk. “Inflation will likely remain within target range and I maintain my 2019 inflation forecast of 4.8%, which is well below the consensus of 5.5%,” he said.
Els also noted, “Further Fed hikes in 2019 will start to take the steam out of the US economy and we believe their expensive equity market will de-rate. Twin deficits in the US will also start to drag on the mighty dollar and we expect US equities to underperform, while the rest of the world is offering cheaper equity markets,” he said. These cheaper equity valuations include the SA market.