Market Overview
Looking ahead to a rocky medium-term
In South Africa, these key themes will dominate in the medium-term:
- Gradual economic recovery will be constrained by political uncertainty and credit rating downgrades
- The domestic political ‘noise’ is set to continue
- A sharp fall in business confidence will hit already weak fixed investment
- Projected weak growth in credit extension, particularly to households
- Agriculture sector set to rebound after drought
- Inflation risks are dissipating but there is no rate relief on the horizon
- Ongoing fiscal consolidation will stunt consumption, and more taxes will follow
Importantly, the rand is volatile, but with a depreciating bias…
Potential negatives:
- Credit rating downgrades and capital outflow risk
- Political upheavals
Potential positives:
- Rand is undervalued
- Reduction in current account deficit
- Inflation pressures are dissipating
The Global outlook:
Heightened global policy uncertainty adds volatility (click on the graph to enlarge)
Source: Ashburton Investments