GDP down to 2009 post-global financial crisis levels

By: Regard Budler, Head of Strategic Initiatives at Momentum Corporate

What does it mean for your retirement fund savings?

In a recent scheduled release of South Africa’s Growth Domestic Profit (GDP) statistics – Stats SA revealed a shocking 3.2% drop in South Africa’s GDP. This is reportedly the worst decrease in GDP since the same period in 2009, in the wake of the global financial crisis.

While economists assess the macro impacts – many of us are left wondering what this all means for our retirement nest egg. “A drop of 3.2% GDP indicates a worrying decrease in our economic growth – our economy is essentially shrinking. It also means that companies are not growing as much as what we had hoped for – and this has an impact for many retirement fund members,” says Regard Budler, Head of Strategic Initiatives at Momentum Corporate.

“Our retirement fund savings are often invested into many listed companies which are unlikely to do as well as what we would see when the economy is growing well. This would certainly have a negative impact on your retirement investments, especially if the low economic growth becomes a long term trend. The average retirement fund member will therefore have to invest more to reach their goal of a comfortable retirement,” cautions Budler.

Budler says, however, that there is no need to panic and explains that if your retirement fund follows an outcomes based investment strategy the fund would make provisions for short term fluctuations in investment values. Retirement fund trustees, asset managers and asset consultants would ensure that investments are well diversified to achieve the long term goals to soften the blow of these short term fluctuations.