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Will 2020 bring good economic news?

What is the outlook?
Image: Bloomberg

Over the course of 2019 there was a lot of talk about the possibility a global recession. While growth has slowed, however, a downturn has not arrived, and sentiment seems to have improved.

Certainly many risks to global growth still remain – most notably trade tensions and major central banks running out of options for further stimulus – but there now appears to be a growing sense that we probably won’t see a recession next year either.

“Growth should edge higher in 2020, limiting recession risks,” global asset manager BlackRock argued in a recent note.

This sentiment is shared by Keith Wade, chief economist and strategist at Schroders.

“After a spell of weaker growth, the world economy looks set to pick up in 2020, extending one of the longest ever periods of expansion,” he wrote in a research note. “The slowdown this year has led to concerns that the US economy might contract. In fact, we see activity gaining support from an easing in US-China trade tensions and lower US interest rates. We have upgraded our 2020 global growth forecast, from 2.4% to 2.6%.”

Wade expects a ‘phase one’ trade deal to be finalised between the US and China, which would see these countries halting any further tariffs on each other’s exports.

“This would prompt global trade and business investment to strengthen,” Wade suggested. “Activity could then improve in Europe and Japan, as well as the US.”

Risk to the downside

This growth will create a favourable environment for risk assets, like stocks, BlackRock noted. However, investors should still be cautious.

“The dovish central bank pivot that drove markets in 2019 is largely behind us,” BlackRock pointed out. “Inflation risks look under-appreciated, and the lull in U.S.-China trade tensions could unwind. This leaves us with a modestly pro-risk stance for 2020.”

In an update to clients, Futuregrowth Asset Management also held the view that ‘a broad-based collapse in growth’ is not the most likely scenario. However, it can’t be ruled out.

“The risk to our base case is skewed to the downside,” Futuregrowth said.

“The two notable potential catalysts to this downside risk are sustained weak Euro area growth and continued global trade friction.”

BlackRock also warned that there are ‘powerful structural trends’ that cannot be ignored and will continue to test the resilience of the global markets in coming years.

“Rising inequality and a surge in populism have implications for taxes and regulation,” it noted. “Trade frictions and deglobalisation are weighing on growth and boosting inflation. Interest rates are nearing lower bounds and crimping the effectiveness of monetary policy. And sustainability-related factors such as climate change are having real-world consequences, affecting asset prices as investors start to pay attention.”

These issues make the longer term outlook far less certain.

Where does that leave SA?

Global uncertainty will also make things more difficult for South Africa, which is urgently in need of higher growth. A global recession would only compound the country’s challenges.

Whatever happens around the world, however, South Africa has to address the specific issues that are holding its economy back.

“Locally, the biggest impediment to higher local growth remains of a structural nature,” Futuregrowth noted.

“The low-growth trap is largely due to policy uncertainty, weak policy implementation, low levels of fixed capital investment and a rigid labour market.”

While noting that there has been some progress towards improving governance, Futuregrowth argued that restoring state-owned enterprises (SOEs) remains critical.

“The perilous state of a number of SOEs remains a negative risk to the fiscus, and therefore to domestic economic growth,” it said. “This includes the negative impact of the acute operational challenges at Eskom.”

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2020 is not likely to be a “bright” year.
That’s a given!

“May the SUN shine on your PV-system”

Will 2020 bring good economic news? = Answer = NO

Nothing will improve in South Africa until the ANC is out of government.

FACT

Careful….EFF…..

?The biggest impediment to higher local growth is of a structural nature”.

They are right.

It is called a failed socialist / communist government structure. The ANC.

No !!! Junk status confirmed, $14 Billion leaving the country and interest rates will spike. You have been warned, Dr. Debt Oh let me get this on the web before the electricity goes out.

When it’s obvious it is obviously wrong.

The current liquidity problems facing the 5 major US banks may very well result in a meltdown before 31 December unless the Federal Reserve change its “non-QE into QE4 before 31 December to prevent the Repo rate to spike again to close to or even above 10% as on 16 September. 31 December is not only end of Quarter but also year end and liquidity among the 5 big ones are at its lowest meaning they can’t lend money on the overnight market to embattled business unable to pay the tax bill. It will very much depend on the FED’s announcement on what they will do with regard the RP crunch. This is where things get interesting: nothing short of QE4 announced by the Fed today, will help relieve the pressure on the “turn” into year end, which will rise ever higher, until it forces dealers to freeze either the Forex swap market, or the repo market, or – devastatingly – both

Any foreign currency bets?

It depends on Trump! The dollar appreciated by 30% against the Dollar Index since 2008. A strong dollar is a killer for emerging market economies. It seems as if this trend is reversing. Trump and the Fed wants a weaker dollar. That will support our economy. With the terrible state of affairs in Luthuli House, we need all the support we can get. So, yes, a weaker dollar is a light on the horizon for Dark South Africa.

There needs to be a catalyst for positive change?

It all depends on the ANC’s policy direction. At present, they’re anti-business (pro-labour), anti-capital (high tax), property rights still under threat.

Good thing the ANC at least got crime 100% under control! Corruption also ceased completely. Hence I’m hopeful for 2020…

WAIT…there IS a ray of hope:

Let’s hope the Bloodhound-team will be able to shatter (with a sonic boom!) the existing land-speed record, when resuming at Hakskeenpan in 2020 🙂

And a podium finish for Giniel de Villiers in the DAKAR 2020!

There will never ever be a bright economic year as long as transformation and BBBEE tops the agenda.
Transformation has failed in all aspects and together with BBBEE are the major factors in South Africa’s poor economic state. There is NOT ONE organisation that improved under transformation, not one.

The global economy will do what it will do & SA will have little to no impact on it’s direction or outcome.In turn the global economy will have little to no impact on SA’s direction or outcome.
Everything that need to happen is firmly in the control of Gov/ANC hands.

And I suppose the 2008/9 meltdown had no effect on South Africa. You better wake up before your dreams turn into nightmares

Terribly sorry for dozing off over the last decade Deon31751, I’ll pay more attention in future. Now over to you & the big 5 US style….

There is a huge difference in projected growth between decent emerging markets and South Africa s. My guess is that Global EM could re-rate this year and DM continue at a pedestrian pace. In SA ,sadly the ANC is trapped between the SACP influence and the Treasury/Tito smart suits guys so no major policy improvements.

My guess-CPI stable, unemployment 30%, growth 0,5%, interest rates drop by 100 bps, JSE-5% to 10% carried by the global stocks,Moodys will finally realize that a country that doesnt grow when the world does is not investment grade, SAA will be liquidated, real estate prices will continue to drop, +-55000 people will be murdered and at least the same number raped.

Shabir Shaik will live out the 2020s in sterling health, the judiciary will become more captured, the Guptas will remain free and poor Judge Zondo will spend the year writing a perfect written report and nothing will be done about it. Marcus will finally add on the braai room in Hermanus and the President will get a nice new jet-maybe a 777!!

Also EWC will not deliver, Juju will be acquitted on all charges and Jamandas will use taxpayer money to battle out his reputation as a genius in the Courts all at taxpayer expense.

SAM is going to the club now for a G&T or 5!

Not only will the Guptas not be extradited from the UAE, but the money stolen by them will never be returned by the UAE. They regard that it’s theirs now and that SA has no rights to it.

Hmmm ….

“The low-growth trap is largely due to policy uncertainty, weak policy implementation, low levels of fixed capital investment and a rigid labour market.”

Loosley and less politely translated: “Incompetent ANC cadres, entrenched in senior government positions, who are incapable of intelligent and swift decision-making have been held to ransom by the unions and bankrupted the country through over-financing loss-making SOE’s. This situation, obvious to global capital markets, has led to funds going to more organised economies like South Korea and the Far East.”

Errr … that should do it.

No—plain and simple. We go to junk and interest rates rise quickly we lose our R 210,000,000,000 ( R 210 billion for the mathematically challenged) in bonds and the jobs go with it. Then it brings in more taxes from a broke government, hurting the electorate even harder. Thank you ANC. Helping the poor REALLY????????????? The reporting in this country is very inept at the causes of all of this. They report on the here and now and NOT HOW WE GOT HERE AND WHO’S “RESPONSIBILITY IT IS!” AND WHO DO WE HOLD ACCOUNTABLE?????????????????????????? Just keep electing the “usual suspects.”

End of comments.

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