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South Africa Country Risk Reports Q2 2015

South Africa Country Risk Reports Q2 2015

Core Views

ANC policy is likely to shift left over the course of the next 18 months as the party attempts to fend off a challenge from populist opponents, and to stem the loss of support owing the electorate's frustrations with public service delivery.

The South African economy will benefit from lower oil prices, and we have upgraded our 2015 real GDP growth forecast to 2.5% from 2.1% due to oil price declines. Private consumption and, to a lesser extent, investment will be the main beneficiaries of lower oil prices.

The South African Reserve Bank will keep the repo rate on hold at 5.75% through 2015, even while the US Federal Reserve hikes rates by 50 basis points. Benign inflationary trends and weak economic growth will prompt the Monetary Policy Committee to become dovish.

The rand will continue to depreciate against a strong US dollar over the course of 2015. With much of the bad news about the economy priced in, and with oil prices heading lower, the pace of the declines will be less than that seen in 2013 and 2014.

Major Forecast Changes

We have upgraded our 2015 real GDP growth forecast to 2.5% from 2.1% previously.

We have changed our forecast for the 2015 current account deficit to 3.6% of GDP from 4.7% previously.

We have revised down our 2015 average inflation forecast to 4.7% from 6.0% previously.


Executive Summary
Core View
Key Forecast Changes
Key Risks To Forecast
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
ANC Policy Being Pushed To The Left
ANC policy is likely to shift left over the course of the next 18 months as the party attempts to fend off a challenge from populist
opponents, and to stem the loss of support owing to the electorate's frustrations with public service delivery.
Table: Political Overview
Long-Term Political Outlook
Political Trials And Tribulations Over The Coming Decade
Many issues threaten South Africa's political stability over the long term, not least the inequalities still stemming from the apartheid era.
Although our core scenario envisages no major change to the political backdrop, we present a number of alternative scenarios.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Activity
Small Boost To Growth From Lower Oil Prices
The South African economy will benefit from lower oil prices, and we have upgraded our 2015 real GDP growth forecast to 2.5% from
2.1% due to oil price declines. Private consumption and, to a lesser extent, investment will be the main beneficiaries of lower oil prices.
Table: Economic Activity
Currency Forecast
ZAR: Depreciation To Continue In 2015
The rand will continue to depreciate against a strong US dollar over the course of 2015. With much of the bad news about the economy
priced in, and with oil prices heading lower, the pace of the declines will be less than that seen in 2013 and 2014.
Table: CURRENCY FORECAST
Monetary Policy
Rate Hold View Gaining Traction
The South African Reserve Bank will keep the repo rate on hold at 5.75% through 2015, even while the US Federal Reserve hikes rates
by 50 basis points. Benign inflationary trends and weak economic growth will prompt the Monetary Policy Committee to become dovish.
Table: Monetary Policy
Global Themes
Key Global Themes For 2015
We expect several global macroeconomic and market themes to play out in 2015, including the return of sovereign debt risk, the
continuation of emerging market currency dilemmas, and the ramifications of a new era for oil prices coming to the fore. Emerging
market reformers will be outperformers, the US will stand alone in macroeconomic terms, and China's reform drive may spell instability
for the global economy.
Chapter 3: 10-Year Forecast
The South African Economy To 2024
Underperformance Among EM Peers Ahead
The South African economy will grow at a slow pace of around 2.7% annually over the coming ten years. Power shortages, industrial
action and divestment in the mining sector will weigh on economic expansion, resulting in long-term economic underperformance versus
emerging market peers.
Table: Long-Term Macroeconomic Forecasts
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
Table: Operational Risk
Availability of Labour
Table: Sub-Saharan Africa – Availability Of Labour Risks
Tab le of Sout h Africa 's Top 10 Source Countries For Migrant Workers , '000
Crime Risk
Table: Lab our Force By Industr y, '000
Table: Sub Saharan Africa Crime Risks
Table: Crime Statistics
Chapter 5: Key Sectors
Autos
Table: Autos Total Market – Historical Data And Forecasts
Table: Motorcycle Market – Historical Data And Forecasts
Food & Drink
Table: Food Consumption Indicators – Historical Data & Forecasts
Table: Mas Grocery Retail Sales By Format – Historical Data & Forecasts
Other Key Sectors
Table: Oil and Gas Sector Key Indicators
Table: Pharma Sector Key Indicators
Table: Infrastructure Sector Key Indicators
Table: Telecoms Sector Key Indicators
Table: Defence and Security Sector Key Indicators
Table: Freight Key Indicators
Chapter 6: BMI Global Assumptions
Global Outlook
New Era For Oil
Table: Global Assumptions
Table: Developed States, Real GDP GrowtH, %
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
Table: Emerging Markets, Real GDP Growth, %

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