The metals and engineering sector is expected to grow for a second consecutive year in 2018 according to Steel and Engineering Industries Federation of Southern Africa (Seifsa) chief economist Michael Ade.
Seifsa said that the sector was poised for 1.1% growth this year, following the 2.7% growth in 2017 after three years of poor performance.
Speaking during the launch of Seifsa’s new sector report today he noted that the growth projection was supported by global economic growth and a rebound in investment and trade against the backdrop of benign financing conditions, accommodative policies, improved confidence and the dissipating impact of the commodity price collapse.
“Commodity prices recovered last year and are expected to gain momentum in 2018, thereby strengthening exports and improving growth prospects for commodity exporters in emerging markets along with enhanced capital flows,” said Ade.
However, he pointed out that some downside risks – such as disorderly financial market movements, negative effects of borrowing costs and rising trade protectionism – to this growth still remained within the sector, which could negatively affect confidence, trade and overall economic activity.
Due to these factors, Ade stated that it was unclear how long the positive outlook would continue given the volatility in commodity prices.
He also cautioned that SA’s recent downgrades to junk status by two credit ratings agencies would increase borrowing costs and the general cost of doing business, thus negatively affecting production and fixed investment into the sector.
