Kicking off the week is the release of the IMF’s January World Economic Outlook (WEO) update on Tuesday.
Earlier this month IMF MD Kristalina Georgieva warned of “an even harder year” for the global economy in 2023 with the main engines of global growth — the US, Europe and China — all experiencing weakening activity and all slowing down simultaneously.
The IMF cut its outlook for global economic growth in 2023 in its October WEO update, reflecting the continuing drag from the war in Ukraine, inflation pressures as well as the high interest rates engineered by central banks such as the US Federal Reserve.
The WEO update will provide an overall assessment of the macroeconomic outlook and challenges for the global economy.
Also on Tuesday, the SA Reserve Bank will release the private sector credit extension data for December. Credit demand remained resilient in 2022 but softened towards year-end, suggesting higher interest rates were starting to bite.
SA’s private sector credit increased by 8.3% on an annual basis in November, coming below market forecasts of 9.05%.
But even though the November rise marked the 17th straight month of growth in private sector credit, credit demand which eased from 9.34% growth a month earlier, was at the softest pace since August.
Absa chief economist Peter Worthington said the moderate pace of growth in private sector borrowing indicates that monetary policy is neither especially accommodative nor especially restrictive right now.
Nedbank senior economist Johannes Khosa said credit growth seems to have peaked in the current cycle.
“It is expected to moderate gradually during 2023, contained by the rise in interest rates and the anticipated slowdown in economic growth,” Khosa said.
Credit standards
“Worries about job security and earnings prospects will also affect household demand for credit. At the same time, lenders could tighten credit standards given the unfavourable economic conditions and the potentially higher risk of rising defaults.”
Tuesday will also see the release of the trade balance data for December. SA recorded a trade surplus of R7.98bn in November, below market expectations of a R13.8bn surplus and after recording a R5.31bn deficit in October. The deficit recorded in October was the first since the R35.9bn deficit recorded in April 2020.
FNB chief economist Mamello Matikinca-Ngwenya said SA’s trade balance is likely to shift into a deficit over the foreseeable horizon as global growth slows and commodity prices soften.
“However, prices could be supported by the anticipated recovery in China, mainly if the recovery is broad-based,” Matikinca-Ngwenya said.
Nedbank said they also expect SA’s trade balance to deteriorate further in 2023.
“Exports are forecast to decline, hurt by the country’s poor operating conditions, weaker global demand, and lower commodity prices,” Khosa said.
Absa Purchasing Managers’ Index (PMI) will be published on Wednesday.
The manufacturing sector proved resilient in December, growing for a third month to 53.1 index points in December from 52.6 in November and at the strongest pace since May despite sustained and intense power cuts.
Manufacturing is SA’s fourth-largest sector, contributing 14% to GDP. The numbers provide valuable insight into the health of the economy.
Absa senior economist Miyelani Maluleke said while the headline Absa PMI number was positive, the sub-indices show a mixed picture.
“Of greatest concern was the business activity index which failed to rise above the neutral 50-point mark through the year,” he said.
On Thursday data on electricity generated and available for distribution for December will be published. The data is expected to reflect challenges in the electricity sector that have worsened over the past few months. Economists say varying stages of load-shedding are expected to persist in the near term and subject to risks in diesel supply.
Other data releases this week include the Naamsa new vehicle sales data for January, which will be published on Wednesday, and the S&P Global PMI release for SA on Friday.
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