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South Africa's economic outlook bleak in 2016

South Africa's economic outlook bleak in 2016

South Africa

South Africa’s economy for the year 2016 seems bleak as the nation remains vulnerable to global economic and financial markets developments.

According to the deputy governor of the South African Reserve Bank, Daniel Mminele, the weakening of the rand among other factors will only allow the economy to expand by a mere 1.5 per cent this year.

‘‘Growth continues to be constrained by certain cyclical elements, such as weaker global trade and commodity price declines, as well as more idiosyncratic factors,’‘ Mminele said in a speech posted on the bank’s website.

Since the end of 2015, the rand has also lost ground against other emerging market currencies

‘‘As at November last year, the Bank’s projections for growth was 1.5 per cent for this year and 2.1 per cent in 2017 as electricity constraints ease, but the risks remain skewed to the downside,’‘ he added.

There are concerns about sluggish growth in the developed nation with the depreciation of the rand posing a significant risk for the South African economy.

Mminele says that despite volatility and depreciation of emerging market currencies, the rand has ‘‘underperformed’‘.

‘‘Since the beginning of last year, the rand has depreciated by 44 per cent against the US dollar, 48 per cent against the Yen, and 31 per cent against the euro. Furthermore, since the end of 2015, the rand has also lost ground against other emerging market currencies,’‘ Mminele explained.

According to Mminele, external and internal developments have been propelling the rand weaker.

Concerns on the slowdown in China’s economy and the decline in commodity prices have contributed to the South Africa’s weak domestic economic outlook.

Meanwhile, the developed nation’s current account deficit has widened and is yet ‘‘another source of vulnerability’‘.

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