PRETORIA (Reuters) – South Africa’s economic growth forecasts will likely be revised upwards by the time the medium-term budget outlook is announced in October as the government finalises reforms to boost growth, Minister of Finance Nhlanhla Nene said on Monday.
Nhlanhla Nene is sworn in as Minister of Finance in Cape Town, South Africa, February 27, 2018. REUTERS/Sumaya Hisham
The economy of Africa’s most industrialised country has struggled to grow in recent years, weighed down by low business and consumer confidence amid political and policy uncertainty.
The Treasury said in February that GDP growth is expected at 1.5 percent this year, up from an estimated one percent last year, helped by a recovery in agriculture and improved investor sentiment.
“We do not want to be overly optimistic about these numbers. At the moment they are pencilled in, but we are likely to revise these numbers upwards come the medium term budget in October,” Nene told a union meeting in Pretoria.
Nene said the 2018/19 budget delivered by his predecessor Malusi Gigaba in February would help to support faster economic growth by finalising many reforms.
He added that a rise in business confidence since President Cyril Ramaphosa succeeded scandal-plagued Jacob Zuma last month has already reduced the strain of debt service costs.
Ratings agency have warned slow economic growth and poor finances of state-owned firms such as power utility Eskom were a risk to the sovereign’s credit ratings.
South Africa’s private-sector activity rises to 14-month high: PMI
South African private-sector economic activity expanded for the first time in seven months in February as political uncertainty eased, prompting increased business activity and higher domestic demand.
The Standard Bank Purchasing Managers’ Index (PMI), compiled by Markit, rose to 51.4 in February from 49.0 in January, crossing the 50 mark that separates expansion from contraction for the first time since July 2017, a report showed on Monday.
The February figure was also the highest the index had reached since December 2016. The new orders sub-index ended six months of contraction and output expanded as new projects increased.
Respondents to the survey said the return to growth of output was the result of product diversification and easing political tensions.
Business confidence hit its highest since late 2015 in January on expectations that new President Cyril Ramaphosa would lead economic reform and clamp down on corruption.
Consumer confidence and local assets have also rallied, with the rand reaching three-year highs late last month. In its budget at the end of February, the treasury raised its economic growth estimate for 2018 to 1.5 percent from 1.1 percent previously.
Former president Jacob Zuma’s nine-year reign was marked by corruption allegations and economic mismanagement that saw the country’s credit downgraded to“junk” by all but one of the three major rating agencies. Zuma has denied any wrong-doing.
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Reporting by Mfuneko Toyana Writing by Olivia Kumwenda-Mtambo; Editing by James Macharia