The first year in office of the new president Joao Lourenço’s reveals a rather positive shift in economic policies, given his determination to clean up politics and the scope of the economic reforms engaged so far. The abandon of the currency peg has eased some pressures on the fx market though they still remain important. The financing package recently signed with the IMF will help to implement structural reforms aimed at diversifying the economy by fostering the development of the private sector. Nevertheless, the overall near-term economic outlook remains embedded in international oil price developments due to the lack of economic diversification. Additionally, the still ailing banking system keeps on straining the private sector
South Africa’s short and medium-term growth prospects remain very uncertain. The external factors that contributed to the economic slowdown in recent years are expected to become more favourable, as Chinese growth stabilises and commodity prices pick up. Internal factors, in contrast, risk having a generally negative impact on total factor productivity (TFP) and on the investment capacity of companies and households.
