Economic Green Shoots in South Africa

Johannesburg 3 October 2024: Financial analyst George Glynos, of ETM analytics believes that the South African economy is in it’s healthiest position it has been in for quite some time.

Speaking as the key-note speaker at the Experian Innovation Summit in Johannesburg this morning, he outlined the scope of data that he and ETM believes is providing definite green-shoots in the economy that point towards a clear turning point in the depressed economy.

From a global perspective, there is a situation where the US markets are completely over-priced after the $7 trillion monetary quantitative easing injected by the FED into the US economy post Covid pandemic.

The result is that there has been a rapid inflation growth that is only now starting to ease via the current liquidity drain, but has had a net result of making housing and the general cost-of-living extremely expensive and has started to cause deep financial strain in the worlds largest economy that may well result in a period of recession

Glynos says that “while global inflation is coming down, the next 3-6 months are still likely to be difficult but that beyond that period there should be improvements”. “A key benefit for South Africa in this scenario is that the US dollar value is over valued and that central banks are selling dollars and buying gold as a safe-haven” he says. With the large gold mining industry in South Africa, the country will see the benefit with gold prices rising and higher demand for gold worldwide.

Overall the South African fiscal risk levels are improving, driving international investors to start buying SA bonds again, proving that the country is back on the right track Glynos says. He believes tat the country is entering the virtuous cycle of lower inflation and economic growth.

“There is a clear likelihood of a 100 -150 basis points rate cut in the short term according to Glynos, and the possibility exists that even further cuts may be on the cards” he comments. Once interest rates reduce further, we will see a stimulus in the economy that should kick-in with around an 18-month lag period he contends.

The debt to GDP ratio is improving and, according to Glynos, now is the time to see further reforms in the country that will see more private sector involvement in state owned enterprises and infrastructure development to tackle the issues that are holding back growth in the economy.