20170119-法国巴黎银行-South_Africa_2017_outlook__Less_ugly_23页_998kb

Summary of South Africa 2017 Outlook

Core Content

This report from the Market Economics team at BNP Paribas Securities provides an outlook for the South African economy and political landscape in 2017. The authors, Jeffrey Schultz and Nic Borain, suggest that while the economic outlook is not entirely positive, it is expected to be "less ugly" compared to 2016. The report highlights a combination of improving external conditions, a potential slowdown in inflation, and cautious optimism about the economy's growth prospects.

Main Points

Economic Outlook

• GDP Growth: Expected to rise to 1.3% in 2017 from 0.4% in 2016, marking a recovery from the previous year's poor performance.
• Inflation: Projected to decrease from an average of 6.3% in 2016 to 5.6% in 2017, potentially allowing the South African Reserve Bank (SARB) to ease monetary policy.
• Terms of Trade: Improved due to rising global commodity prices and the end of the drought, which has helped the agricultural sector.
• External Account: The current account deficit is expected to narrow, possibly avoiding a 'junk' credit rating.
• Fixed Investment: Likely to remain weak, but with a slight return to positive growth after a significant decline in 2016.
• Private Consumption: Expected to grow, driven by a potential easing of monetary policy and improved economic conditions.

Political Outlook

• ANC Dynamics: The ruling African National Congress (ANC) is expected to continue with political instability, especially with President Jacob Zuma facing legal challenges and a potential cabinet reshuffle.
• Leadership Transition: The ANC's consultative and national conferences in June and December 2017 will be pivotal in determining the party's future direction.
• Zuma's Legal Issues: Anticipated to face over 700 corruption-related charges, which could impact his political standing and the ANC's cohesion.
• Minimum Wage: A new national minimum wage of ZAR 3,500/month is expected to be finalized by early 2017, though implementation delays are likely.

Key Risks

• Global Uncertainty: Concerns over US Federal Reserve rate hikes and potential changes in global trade policies under the Trump administration.
• Domestic Political Instability: Potential for cabinet reshuffles, ANC succession debates, and continued legal challenges against President Zuma.
• Fiscal and Monetary Policy: The government's fiscal stance and the SARB's interest rate decisions are critical for economic stability.

Key Information

Table 1: Economic and Financial Forecasts

Table 2: Key Assumptions for 2017

• Global Growth and Activity: Uncertain, but improved commodity prices and a more stable Chinese economy offer some optimism.
• US Fed Rate Hikes: Expected to hike rates twice in 2017 and four times in 2018, which may increase financial stress for EMs.
• ECB QE: Likely to reduce the pace of asset purchases but extend the program, potentially leading to further reductions in the future.
• Oil Prices: Forecasted to rise to USD58/bbl in 2017 and USD63/bbl in 2018.
• Fiscal Policy: The government is expected to maintain a prudent fiscal stance, possibly avoiding a VAT hike in 2017 and exploring other revenue-raising measures.
• Inflation: Headline CPI inflation is expected to slow, with core CPI inflation also showing signs of moderation.
• Monetary Policy: The SARB may cut interest rates by 25bp in September and November 2017.
• ZAR: Expected to remain weak, ending the year at USD15.40/ZAR, though potential improvement is possible if external-account vulnerabilities reduce.
• Labour Relations: The steel and engineering sectors are expected to face more volatile wage negotiations, with a high risk of strikes.
• Minimum Wage: Likely to be finalized by early 2017, with implementation delays expected.
• ANC Conferences: The June consultative conference is expected to be controlled by the Zuma faction, while the December national conference is the most important political event of the year.

Conclusion

The report suggests that while South Africa faces significant political and economic challenges in 2017, there is potential for a less severe economic downturn compared to 2016. The country's improved terms of trade, a slowing inflation rate, and the possibility of monetary easing offer some hope. However, the outlook remains cautiously optimistic, with risks from global and domestic uncertainty, and the potential for renewed political instability and social tensions. The report also emphasizes the importance of the ANC's internal dynamics and the impact of wage negotiations on the broader economy.