27 January 2016

Southern Africa: SA Among Worst Economic Performers in Region

South Africa will be among the worst economic performers in sub-Saharan Africa as higher tariff barriers, protection for inefficient industries and deeper state intervention are set to draw back growth this year, according to analysts.

However, economists said this week that overall growth in the region would accelerate only "slightly".

Major threats it faces "are not projected to wane soon," said FocusEconomics analysts in a report on sub-Saharan economic performance.

"At the other end of the spectrum, South Africa is likely to be the worst performer, followed by Angola and Botswana. Looking forward, inflationary pressures are expected to intensify amid a depreciating currency and severe droughts," said FocusEconomics in its report released on Tuesday evening.

FocusEconomics' panel of economic analysts is now expecting SA's economy to expand by 1.3% this year and by 2% in 2017.

Economic hurdles

Inflation in SA inched up from 4.8% in November to 5.2% in December, thus "hitting the highest reading in over a year", they said.

Analysts at NKC African Economics on Tuesday said the economic problems South Africa faces would be an impediment to growth in the next few years.

The country is battling economic hurdles that attracted forecast downloads which have been worsened by persistently lower commodity prices.

"Higher tariff barriers, protection for inefficient industries, deeper State interventions and more overall protectionism will not help lift economic growth to the levels of 6% and above that seem to be a minimum for the country to emerge from the current logjams, inefficiencies and stagnation," said Gary van Staden, analyst at NKC African Economics.

While SA is struggling along, its regional peers Kenya and Nigeria will expand by 6% and 3.8% respectively this year.

However, the rebound in the region still faces threats from oil prices currently at their lowest levels in over 10 years.

Additionally, said the FocusEconomics analysts, the United States Federal Reserve's monetary tightening will keep currencies under pressure this year.

"Moreover, the slowdown of the Chinese economy and domestic vulnerabilities within the region, such as political turmoil in South Africa and security threats in Kenya and Nigeria, will keep growth below potential."

In Nigeria, government finances are under severe pressure due to decreased oil revenues and the re-entry of Iran into international oil markets, which could further complicate the scenario for the giant west African economy.

The country, the continent's biggest economy and top exporter of oil, "may be forced to turn to external bond financing to sustain spending" this year.

Source: Fin24

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