South Africa

RGE's Q1 2010 South Africa Outlook

RGE expects South Africa to record a sluggish 2.5% recovery in 2010 after dipping into a recession (2% negative growth) in 2009. Sustainable growth recovery requires a pickup in domestic demand, yet South Africa seems likely to continue to rely on external demand.  With a relatively high interest rate and a central bank averse to FX intervention, the rand was an attractive option in the global carry trade, returning to near its 2008 highs. Any unwinding of such trades poses a risk to the fragile recovery in 2010. Moreover, as South Africa addresses its chronic high unemployment level, its fiscal position will deteriorate. Other potential red flags include the widening current account gap and higher electricity prices as the country faces an anemic recovery.

Inflation should stay in check, although inflationary expectations are on the rise. Electricity provider Eskom’s proposed 25% hike in electricity prices should restrain consumption as it curtails...

Read the Q1 2010 South Africa Outlook.