20180608-法国巴黎银行-South_African_growth__A_bump_in_the_road_9页_511kb

South African Growth: A Bump in the Road

Core Content Summary

This document provides an economic outlook for South Africa's growth in 2018 and 2019, highlighting the challenges faced in the first quarter of 2018 and the potential for recovery in the coming months. The analysis is conducted by Jeffrey Schultz, a Senior Economist at BNP Paribas South Africa.

Main Points

• GDP Performance in Q1 2018: South Africa's GDP growth in Q1 2018 was disappointing, with a contraction in production-side growth and a decline in fixed investment. This was attributed to a broad-based slowdown across key sectors and the impact of high comparison bases from the previous quarter.

• Revised Growth Forecast: Despite the weak Q1 performance, the outlook remains positive. The 2018 growth forecast has been revised down by 0.5 percentage points to 1.7%, while 2019 growth is expected to rise to 2.1%, reflecting a likely GDP peak in Q1 2019 due to a lower base.

• Balance of Payments Concerns: The Q1 GDP contraction was worsened by a negative contribution from net trade, leading to a potential first quarterly trade deficit in two years and a widening current account deficit. The terms of trade hit their weakest level in five quarters.

• Currency Vulnerability: The ZAR's 'less vulnerable' status in the CEEMEA region could be challenged by higher oil prices, USD appreciation, and uncertainty around land reform, mining, and energy policies.

• Policy Certainty and Investment Outlook: There is optimism that greater policy certainty in mining and energy will improve investor confidence. The document suggests that fixed investment (GDFI) is expected to stabilize and grow, moving from a contraction of 3.2% in Q1 to a projected 1.7% in 2018 and 2.8% in 2019.

• Positive Indicators: Real inventory accumulation turned positive in Q1, indicating a potential recovery in demand. High-frequency confidence and leading indicators are at multi-year highs, suggesting an uptick in growth is likely.

• Land Policy as a Risk: The government's approach to land rights and reform is seen as a key risk to the recovery, with the constitutional review committee expected to report on the amendment of Section 25 of the constitution in August.

Key Information

• GDP Growth:

  • Q1 2018: 2.2% q/q saar, 0.8% y/y
  • Q4 2017: 3.1% q/q saar, 1.5% y/y
  • 2018 Forecast: 1.7% (down 0.5pp)
  • 2019 Forecast: 2.1% (up 0.2pp)

• Fixed Investment (GDFI):

  • Q1 2018: -3.2% q/q
  • Q4 2017: +7.4% q/q
  • Expected Growth: 1.7% in 2018, 2.8% in 2019

• Balance of Payments:

  • Expected Q1 trade deficit: 0.5% of GDP
  • Expected current account deficit: 3.7% of GDP (up from 2.9% in Q4)

• Monetary Policy Outlook:

  • A 25bp rate cut by the SARB in November is still considered possible
  • No rate hikes are expected over the next 12-18 months

• Confidence and Leading Indicators:

  • High-frequency confidence and leading indicators are at multi-year highs
  • Political stability and policy certainty are expected to boost confidence

• Land Policy Risk:

  • The outcome of the constitutional review committee on land reform is critical
  • The report is due in August, but no specific date has been set

Charts Mentioned

• Chart 1: Broad-based Q1 GDP disappointment
• Chart 2: Terms-of-trade slip to hit Q1 balance of payments
• Chart 3: GDFI likely to keep stabilising relative to GDP
• Chart 4: High-frequency data still point to growth uptick

Legal Disclaimer

This document is a marketing communication and not independent research. It is intended for professional clients and eligible counterparties and may contain "Research" as defined under MiFID II. It does not constitute investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. The information is not to be relied upon as authoritative and may be subject to change without notice. BNPP does not offer investment, financial, legal, or tax advice and disclaims all liability for any use of the information contained herein.

US Disclosures

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UK and France Disclosures

• UK: Document is communicated by BNPP London Branch, which is authorized and supervised by the ECB, ACPR, and FCA
• France: Produced and/or distributed by BNPP SA and BNPP Arbitrage, both authorized and supervised by the ECB and ACPR

Germany Disclosures

• Germany: Distributed by BNPP S.A. Niederlassung Deutschland, a branch of BNPP S.A., authorized and supervised by the ECB and ACPR, and subject to limited supervision by BaFin

This summary encapsulates the key economic outlook, challenges, and policy considerations for South Africa's growth in 2018 and 2019, along with the necessary legal and regulatory disclosures.