2016 Outlook: GDP Growth 0.45% and Interest Rates up by 1.0%

2016 started in much the same way 2015 ended – with significant
volatility in both the local and international financial markets. The Rand
is currently on the back foot due to growth concerns in China as well as
the rising risk of a sovereign credit rating downgrade for SA. In light of
the pressure on the Rand, we have increased our inflation forecast to
6.1% for 2016. Elevated inflation and currency weakness is also likely to
see the SARB hike rates more aggressively than we previously thought,
we now expect a cumulative 100bps of rate hikes this year. The GDP
growth outlook has also been revised lower to 0.5% as low confidence,
rising rates and elevated cost growth weigh on the spending and
investment intentions of households and corporates. All told 2016 is
likely to be SA’s most difficult year since the financial crisis. Despite the
current challenges, we are expecting next year to be better from both a
domestic and international standpoint and as such domestic GDP
growth is forecast to expand to 1.2% in 2017.

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