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Economy in 2021: 'Expect a better year for South African assets'

15 January 2021 3:02 PM

An economist expects China growth at 9.5%, US money-printing, rising metal prices and trade- and current-account surpluses in SA.

The South African economy, in 2020, suffered its deepest recession in 110 years.

With mass vaccinations against Covid-19 on the horizon, 2021 will almost certainly be better – barring any other “Black Swan” events.

The Money Show’s Bruce Whitfield asked Jeff Schultz, a senior economist at BNP Paribas SA, to provide an outlook for the economy in 2021.

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Schultz is not ruling out another rate cut this year but expects the South African Reserve Bank’s Monetary Policy Committee to remain on hold in the coming week.

He forecasts 2.5% GDP growth for 2021.

There are, however, many headwinds to recovery, chief among them Eskom’s failure to produce enough electricity

Schultz expects a better year on the Johannesburg Stock Exchange, driven by China’s booming economy (he expects growth of 9.5%), continued money-printing in the rich world, improved metal prices and ongoing low inflation and interest rates.

We don’t rule out a rate cut... There are now additional lockdown measures… we’ve had benign inflation, and upside growth surprises, so it’s a mixed bag. I don’t rule out the possibility of a 25 basis points cut, but we think the central bank will remain on hold next week.

Jeff Schultz, senior economist - BNP Paribas SA

The recovery in 2021 was probably going to disappoint many expectations… a lot of structural weaknesses such as electricity supply is pertinent right now… It’s going to be another tough year. We did not get off to a strong start.

Jeff Schultz, senior economist - BNP Paribas SA

There’s this dichotomy between booming stock markets, stronger emerging market currencies but still a very weak macro-economic background…

Jeff Schultz, senior economist - BNP Paribas SA

We see China growing at 9.5%... the US Federal Reserve continuing unabatedly with its QE programme, a weaker US dollar that’s propping up metal prices, and low-for-longer domestic inflation and policy rates environment. It lays the basis for trade- and current-account surpluses in South Africa and probably a better year for rand assets.

Jeff Schultz, senior economist - BNP Paribas SA

Listen to the interview in the audio below.




15 January 2021 3:02 PM

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