China and India the only Brics performers
Brics countries
battered by the
global commodity
price crash and
blighted with similar internal
conflicts of political and
economic instability and
corruption are likely to
remain on the verge of or
deep in recession with only
China and India expected to
remain on a strong growth
path in 2016.
Nascence Advisory and
Research economist Xhanti
Payi said that while China
and India were performing
well, with growth forecasts
of 6% and 7% respectively,
there were also downside
risks, such as rising debt
levels in China and exchange
rate volatility for these
economies.
“India has been very
successful in keeping a
robust economy, especially
the services sector. They are
taking advantage of domestic
levers of growth and reform.
The services sector continues
to grow even here in South
Africa,” he said.
Brazil, which faces major
economic trouble and
political scandal, similar to
South Africa, that is expected
to result in the impeachment
or resignation of president
Dilma Rousseff, was
expected to contract by 3%,
Payi said.
“Brazil has the highest
risks, especially politically.
But further, the country has
lost policy direction and will
struggle to gain confidence
in its treasury and central
bank,” Payi said.
Nedbank
senior
economist
Nicky Weimar
said the
commodity
price crash
due to China’s
slow-down
had hit South
Africa, Brazil,
Russia and
China. China
grew at 6.9%
in 2015, the
lowest rate
achieved
in 25 years, while India
outperformed the group with
growth of 7.5%, Weimar said.
These countries were
expected to continue to grow,
although China’s growth
would decelerate, Brazil
and Russia
would remain
in recession
contracting by
3% and 3.8%
respectively,
while South
Africa was
likely to
achieve
growth of
0.2% GDP
growth
followed by
0.9% in 2017,
she added.
“China
will slow down further and
ease towards 6% in the next
three years and will change
in composition. It used to
be heavy industry based and
will transition to a more
services based economy
as China becomes more
sophisticated,” Weimar said.
“Brazil and SA are similar
economies – both have
widespread poverty and
inequality and they are
in a political crisis. They
are hugely dependent on
commodities.”
Weimar said South Africa
could claw itself out of its
political and economic
troubles by “getting the
basics right”.
“We are in the same
situation as Brazil and that is
a problem."
Weimar added that the
risk of SA following Brazil to
junk status was “extremely
high” with a 60/40 chance
of a credit rating downgrade
before year end.
“If you look at Brazil,
recession was a big factor.
The cost of credit will go
up, local interest rates will
go up higher, the rand will
fall further and there will be
much higher inflation – and
if you weren’t already in
recession it is one sure way to
trigger it.”
Weimar said the
government should
invest in its people, in the
economy, in education
and socially to encourage
empowerment rather than
dependency on the state.
INSERT & CAPTION
South Africa could
claw itself out of
its political and
economic troubles by
‘getting the basics
right’.
– Nicky Weimar
