Among the world's big emerging markets, South Africa has been one of the more notable underperformers.
The country continues to struggle with slow economic growth and high unemployment at 27%.
Citi's Gina Schoeman anticipates "more downside risk" to the economy, which she expects will grow just 1.9% in 2013 and 2.8% in 2014. The biggest risks include labor unrest, especially in the form of prolonged strikes in the motor sector that could drag on GDP growth.
While consumption could pick up modestly in the near-term ahead of upcoming elections, Schoeman thinks "stretched balance sheets remain a significant ‘cap’ to household consumption growth."
"The persistently wide current account and budget deficits bring structural weakness to the fore, keeping the ZAR on the back foot and prompting a hawkish undertone to SARB [South African Reserve Bank] commentary. That said, rate hikes are still highly unlikely while CPI is back within the 3-6% target band (even if mostly due to base effects).
"Put together, we believe all these factors create the perfect storm for another sovereign ratings downgrade which only clear policy direction and diminished labour strife can avoid."
South Africans will be voting some time during April or May 2014. The African National Congress is expected to win a majority but "it could see its percentage drop," writes Nomura's Alastair Newton.
After the elections, the ANC could take a tougher line with the the Congress of South African Trade Unions (COSATU) over "labor market changes, especially if it loses support from the youth, the unemployed and the poor," writes Peter Worthington at Barclays.
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