SIMON BROWN: I’m chatting now with Lullu Krugel, PwC South Africa chief economist. Lullu, I appreciate the early morning time. You’ve done an update to your economic outlook for the rest of this year and into the next. I remember at the beginning of the year chatting with your colleague, Christie Viljoen, around what your expectations were, and the point that you make in this new update is that in essence we are … looking at the downside scenario from the beginning of the year. You would have had a sort of middle line, an upside and a downside – and we are heading to that downside potentially.
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LULLU KRUGEL: Good morning, Simon. Yes, unfortunately the situation is not looking better. It’s looking worse than we expected it could at the beginning of the year. Across the board we also looked at other economists and what they’ve been saying and, if you look at the picture, I would say since September last year, basically, every time that you look at forecasts, you see them going down and down – and that includes our own, unfortunately.
So yes, our growth outlook for this year unfortunately is sitting closer to that middle range or the downside scenario that we anticipated at the beginning of the year, in the region of 1.5%.
SIMON BROWN: Some of this is not our fault, and I use ‘our’ in the sort of royal we of the country. I think of the petrol price. I think of the war in Ukraine. I think most notably of Eskom, so some of these are own-goals in much of a sense.
LULLU KRUGEL: Absolutely. Unfortunately we’re sitting with a double whammy. If you look at our own circumstances, as you mentioned,
…we believe that the lack of a consistent and reliable electricity supply is the biggest challenge that we are sitting with in terms of GDP growth. In fact, it’s been one of the key factors that has negatively impacted our growth over the last couple of years.
Even during Covid we believe that the load shedding unfortunately added to the economic woes that we saw in 2020.
So unfortunately, yes, we are in our view potentially heading for another record here, which would mean in our opinion that the economy could have grown probably around two-and-a-half, three percentage points more than what we were anticipating if it wasn’t for the load shedding.
Of course, as you mentioned, we are also sitting with external factors. So one almost feels like you have to say, ‘Can we just get a break from all of this as South Africans?’
SIMON BROWN: Well, the good news is oil was $103/barrel this morning, so maybe we are going to get something. But that’s a big difference – 2.5% or 3%, instead of 1.5%.
A quick last question. We certainly saw it yesterday in our market – and I know that one day doesn’t necessarily spell anything – but commodity prices coming down also hurts us because of course we have been benefiting the last couple of years in terms of tax receipts and revenues from elevated commodity prices.
LULLU KRUGEL: Yes. Unfortunately the boom that we’ve seen on that side seems to be coming to an end. We did know it would happen, but I think we were hoping that it would be in different circumstances, not what we are sitting with at the moment.
SIMON BROWN: Yes, and I’d hoped it would last maybe a little longer, but commodity rallies will do what they do.
We’ll leave that there. Lullu Krugel, chief economist at PwC South Africa, I appreciate the early morning time.
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