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Wed May 25 13:10:16 SAST 2016

FNB economists warn of difficult year for SA

TMG Digital | 18 January, 2016 07:46
“The rand is currently on the back foot due to growth concerns in China as well as the rising risk of a sovereign credit rating downgrade for SA. File photo
Image by: HANNIBAL HANSCHKE / REUTERS

All told 2016 is likely to be South Africa’s most difficult year since the 2008 global financial crisis‚ FNB economists have warned.

Despite the current challenges though‚ economists Alex Smith and Mamello Matikinca say they expect next year to be better from both a domestic and international standpoint‚ with domestic GDP growth forecast to expand to 1.2% in 2017.

They note that 2016 started in much the same way 2015 ended – with significant volatility in both the local and international financial markets.

“The rand is currently on the back foot due to growth concerns in China as well as the rising risk of a sovereign credit rating downgrade for SA. In light of the pressure on the rand‚ we have increased our inflation forecast to 6.1% for 2016.

“Elevated inflation and currency weakness is also likely to see the SARB hike rates more aggressively than we previously thought. We now expect a cumulative 100bps of rate hikes this year‚” they say .

Their GDP growth outlook has also been revised lower to 0.5% as low confidence‚ rising rates and elevated cost growth weigh on the spending and investment intentions of households and corporates‚ they add.

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