Rosy prospects for SA international trade – economist
6 Mar 2019 - by
The significant contribution made by manufacturing to the 1.4% growth recorded in the fourth quarter (Q4) of 2018 has drawn positive reaction from all sectors of industry, but the 0.8% overall growth rate for the year remains a concern.
“This is especially because of the contractions in mining, construction and gross fixed capital formation,” said Business Unity South Africa (Busa) CEO Tanya Cohen.
“Although moderate, the 0.8% growth recorded in 2018 is welcome, particularly on the back of a 4.5% improvement in manufacturing in Q4. However, the annual growth rate remains off target for the country’s goals of creating a sustainable, competitive economy and of ensuring that we generate jobs. It is a symptom of the overall structure of the economy, which remains concentrated, is not dynamic enough and agile. This is apparent in the low levels of participation by small business,” she said.
Steel and Engineering Industries Federation of Southern Africa (Seifsa) chief economist Dr Michael Ade said that until now the South African economy had looked vulnerable and faced prospects of a continuous slowdown amid high debt and deficits, increasing production costs and unemployment. “However, since the rebound in growth in quarter three 2018 from a technical recession, there is a promising basis for increased economic activity and expansion of industry activity, driven by firming local demand and promising manufacturing production.”
Ade said despite the improvement in domestic economic activity, there was still a need for policy consistently to support initiatives aimed at continuously improving GDP in order to ensure sustainability. This is especially given that the World Bank, the National Treasury and the South African Reserve Bank all slashed their initial GDP growth forecasts for 2019, based on an increasingly difficult domestic environment.
He said the prospects for improved international trade for South Africa were rosy, given the boost early last week by the news that US President Donald Trump had granted China another amnesty on possible further import tariff hikes. In return, China promised not to depreciate its currency as a weak yuan makes Chinese exports cheaper. Ade said the scenario created a conducive atmosphere for increased South African exports which would help reverse a negative domestic trade balance recorded in January 2019.