Growth figures stress need for credible turnaround plan

Belinda Bantham -- Wed, 12/04/2019 - 14:27

Growth figures stress need for credible turnaround plan

The latest worse-than-expected growth figures for the third quarter of 2019 again emphasise the urgent need to implement a credible turnaround plan to lift the economy out of its current 'low growth trap'.

It also underlines the serious economic challenges faced by South Africa, adds NWU Business School economist Prof Raymond Parsons.

Based on previous economic data the South African Reserve Bank (SARB), National Treasury, credit rating agencies and several private sector economists all had already further lowered their growth forecasts for 2019 to 0,5%. Yet these forecasts may now prove to be on the optimistic side. The economy will struggle to even translate these minimalist growth forecasts into reality.

Mixed fourth-quarter economic trends now pose a risk that average growth in 2019 may turn out to be even lower than 0,5%.

Growth forecasts for 2020 will in any case need to be revised downward, possibly closer to 1%. These growth prospects remain completely inadequate to drive what South Africa needs to meet its socio-economic challenges, including fixing its public finances. The economy is in the midst of a deepening crisis – as SARB deputy governor Kuben Naidoo recently put it.

Speedier economic and fiscal reforms must therefore be expedited to reduce policy uncertainty, boost investor confidence and lift the economy out of its current low growth trap.

A sustained reform momentum needs to be more visibly demonstrated. To avoid further investment downgrades SA must be clearly seen to be implementing – in collaboration with the private sector – a credible turnaround economic plan to promote job-rich growth.

This overriding priority should thus set the agenda of the next top-level economic indaba between organised business and government scheduled for mid-January 2020. And confidence-building will also require strong reinforcement and economic steersmanship from both the President's 2020 state-of-the-nation address and the main Budget in February.