Country Report South Africa March 2009

Outlook for 2009-10

• South Africa's next general electionto be held on April 22ndis almost certain to return another African National Congress (ANC) government.
• The recently formed opposition party, Congress of the People (Cope), will struggle to secure a mass defection of voters from the ANC.
• South Africa's president-in-waiting, Jacob Zuma, may face a third corruption trial in August, following the election, but this is unlikely to prevent him from becoming president if the ANC wins.
• Given quickly declining business and consumer confidence, the government's fiscal stimulus package will have a limited effect and the economy is forecast to contract by 1.6% in 2009, before recovering to 3.1% in 2010.
• The rand will make up some of its recent losses against the US dollar, but will depreciate to average R10.5:US$1 in 2009 and R11.6:US$1 in 2010.
• Inflation is forecast to subside to 6% in 2009 and 5.4% in 2010, helped by the introduction of a new, re-weighted price index and weaker commodity prices.
• After an increase in 2008, to 8% of GDP, the current-account deficit is forecast to narrow to 5.3% of GDP in 2009 and to just under 5% of GDP in 2010.

Monthly review

• Cope has selected Mvuma Dandala to be the party's presidential nominee, but he is not well known and will struggle to make an impact.
• The finance minister predicts a budget deficit of 3.9% of GDP in 2009/10 as the government maintains planned spending in the face of falling revenue.
• The budget proposes to push ahead with massive investment in infrastructure over the next three years, and to improve social provision.
• The government, business and labour, have agreed a framework to deal with the global economic downturn, including possible help for struggling sectors. However, there are unlikely to be any major bail-outs.
• Real GDP shrank by 1.8% in the fourth quarter of 2008, the first contraction for ten years, as manufacturing output slumped and retailing remained weak. Agriculture and construction were the fastest-growing sectors.
• Inflation, as measured by the new structured and re-weighted consumer price index, fell to 8.1% in January 2009 and remains on a downward trend.
• The trade deficit hit a new peak in January 2009 as exports contracted in response to the global economic downturn while imports edged higher.

Source: Country Report