Recent Study: South Africa Business Forecast Report Q3 2013

BMI sees the South African economy continuing its uneven recovery over the medium term, with real GDP expected to grow by just 2.8% in 2013. Although the consumer sector is holding up, the supply side is lagging behind, and there are widespread concerns that the recovery is not sufficiently broad-based. A key downside risk stems from industrial unrest in the mining sector.

We forecast that South Africa's repo rate will be kept steady at 5.00% over the medium term. Although South Africa faces a weak growth outlook and risks are to the downside, inflation is likely to tick up during the course of 2013. This stagflationary scenario will likely force the South African Reserve Bank's Monetary Policy Committee to maintain the status quo.

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Political risk is heightened amid industrial unrest in the mining and agricultural sectors. Furthermore, there is an ongoing debate regarding nationalisation of key industries including mining. However, we do not see nationalisation as an imminent threat.

Major Forecast Changes

No major forecast changes.

Key Risks To Outlook

A sustained bout of global risk aversion with an attendant sharp outflow of portfolio funds would threaten South Africa's precarious balance of payments.

A sudden uptick in domestic political risk, such as an escalation of the industrial unrest blighting various sectors, is a key risk. A sustained period of high oil prices would exacerbate the alreadysizeable current account deficit.

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