South African economy grows strongly in Q4 2017, but growth momentum to slow down

The South African economy surprisingly grew solidly in the fourth quarter. The unexpected solid expansion of the South African economy in the December quarter led to the USD/ZAR pair to ease by 10 pips to levels around 11.75 yesterday morning.

While consensus had expected an annualized quarter-on-quarter rise of 1.8 percent on a seasonally adjusted basis, the published data surprised with a rise of 3.1 percent. This is good news in view of Moody’s rating review at the end of the month – as higher growth facilities the urgently required consolidation of the public finances.

The change in government and the hope of a change in politics are expected to lead to positive momentum for investments, noted Commerzbank in a research report. But the planned tax rises, rising imports and the continued drought are expected to decelerate the growth momentum.

“We remain cautious regarding the rand”, added Commerzbank.

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