After suffering through the effects of a deep recession, South Africa is bouncing back. The country-related ETF may start to reflect an economy with normal growth beginning next year.
According to the National Treasury forecast, South Africa’s economy is expected to grow 1.5% next year as consumer spending and investment increase and infrastructure projects get under way, report Nasreen Seria and Mike Cohen for Bloomberg. Growth will likely average 2.5% over the coming years. For 2009, the economy is projected to contract 1.9%.
Other areas forecast to grow next year include:
- The recent recession has pushed the country’s deficit to 7.6% of GDP in the year through March, but the Treasury expects it to ease in the coming years. The Treasury estimated that consumer spending will expand 0.9% in 2010 after contracting 3.1% this year.
- The government is pessimistic about growth forecasts, citing lower global demand for South African goods in the near term. Exports are forecast to grow 3.8% in 2010 after contracting 19.8% this year, while imports are projected to expand 4.2% following a 20.3% drop in 2009.
On the downside, South Africa still faces challenges:
- South Africa is struggling with an AIDS Pandemic, massive poverty and unrest because of public service cutbacks, comments Danny Schechter for The Market Oracle.
- The country has lost 500,000 jobs, tax revenue has diminished but expenditures are still high.
Schechter says that the financial crisis stemming from the United States should be examined to ensure that South Africa won’t be caught in the same situation again. He suggests the country needs to turn more inward to attain a self-sufficiency in order to shield the economy against external forces.
- iShares MSCI South Africa Index Fund (NYSEArca: EZA): up 43.6% year-to-date
Max Chen contributed to this article.