Policy Uncertainty Index worsens to 71.1 in the first quarter

29th March 2023 By: Marleny Arnoldi - Deputy Editor Online

The North-West University (NWU) Business School’s Policy Uncertainty Index (PUI) rose to a record level of 71.7 in the first quarter of the year, from the 53.2 recorded in the fourth quarter of last year, indicating high levels of uncertainty.

The NWU Business School attributes the strong elevation of the PUI in the first quarter to a convergence of contrary global and domestic factors, which greatly outweighed the positive ones.

For example, the ongoing Ukraine war and rising tension between the US and China, combined with high inflation and low growth, “underscores obdurate levels of uncertainty globally”.

It says that recent banking turmoil, referring to Silicon Valley Bank and Credit Suisse, also adds another level of uncertainty and, therefore, growth and interest rates are the two main economic variables one should monitor for the remainder of this year.

The risks of a worldwide recession seem to have subsided for now. The International Monetary Fund (IMF) anticipates a global growth rate of 2.9% for this year and 3.1% for 2024.

The business school explains that the reopening of the Chinese economy, following a protracted Covid-19 lockdown, offers a prospect of faster-than-expected global economic recovery.

The IMF further expects that 84% of countries will have lower headline inflation this year, although inflation remains high.

A positive note struck in South Africa, the business school says, was the National Budget on February 22, which was generally well received by business, as were efforts to tackle the energy crisis, including by declaring a State of Disaster.

Nevertheless, the negative factors that greatly eclipsed the positive ones in the first quarter have been persistent loadshedding, acute industrial action, low growth, infrastructural bottlenecks, violent crime, corruption, the Financial Action Task Force greylisting and delayed reforms.

The single biggest factor underlying the high PUI, however, is the energy crisis.

The NWU Business School says it is possible for South Africa to turn the tide, by effectively implementing projects and policy commitments.

“The biggest challenge now is to rebuild confidence and reduce policy uncertainty. The Presidential Investment Conference next week will be one good platform from which to do so and help create a favourable environment for job-rich growth,” it concludes.