SA Investment Strategy | The boom and the bust: Increasing probability for SA GDP to remain below 1% in 2020: Downgrading SA Bonds and Banks

Increasing scope for SA GDP growth to remain below 0.8% in 2020: Investment has vanished as a contributor to SA's GDP growth. It is ironic that the relative weight of the tertiary sector (consumption) in SA ‘s GDP has increased in recent years, yet the contribution of the tertiary sector to SA's real GDP growth has slowed consistently every year since 2011 (from 2.5% in 2011 to 0.7% in 2018). Trends in investment tend to be monophasic, with consumption trends likely to follow. Unless investment trends improve, we remain sceptical that SA's real household consumption expenditure slows further in 2020. Consequently, we forecast SA's GDP growth at 0.8% in CY'20, below consensus expectations of 1.6%. In a bear-case scenario, we forecast SA's budget deficit at 6% GDP in FY'19/20. We remain sceptical that SA's increasing fiscal concerns are likely to weigh further on business confidence crowding out investment in H2'19/H1'20.