South Africa riots could dent economic growth- Deutsche Bank

FILE PHOTO: Unrest linked to the jailing of former South African President Zuma, in Vosloorus
FILE PHOTO: Members of a private security walk at a looted shopping mall as the country deploys army to quell unrest linked to the jailing of former South African President Jacob Zuma, in Vosloorus, South Africa, July 14, 2021. REUTERS/Siphiwe Sibeko

July 15, 2021

LONDON (Reuters) – Deutsche Bank said on Thursday that riots in South Africa could shave 0.8% from the country’s economic growth this year and lead to a possible hit to the budget balance of some 0.2 to 0.5% of gross domestic product.

The bank, which had been forecasting 4.8% growth this year for South Africa, said the 2022 outlook may be skewed higher from the current 2.8% estimate, by infrastructure rebuilding and inventory accumulation efforts, along with higher vaccinations and commodity prices.

“While this setback may be marginal on paper with some gains rolled back, the medium-term outlook remains positive, in our view,” Economist Danelee Masia wrote in a research note.

Given the supply shock ramifications for food prices should be short-lived, the bank said it did not think the central bank would respond with a rate hike in July, although a rate hike remained a possibility in November.

The hit from the unrest reinforced the bank’s bearish view on the rand on a relative basis, but it saw somewhat more value in South African fixed income on the back of the recent sell-off.

(Reporting by Tom Arnold; editing ny Sujata Rao)