South Africa Economist will grow by about 3%
Tag: South Africa, South Africa Economist
Summary: South Africa's finance ministry and the International Monetary Fund have released lower forecasts, for 2.7% and 2.5% growth this year, respectively.
South Africa's finance ministry and the International Monetary Fund have released lower forecasts, for 2.7% and 2.5% growth this year, respectively.
The reserve bank's forecast for 3% growth this year, updated when the bank's monetary policy committee announced Thursday that it was keeping interest rates on hold for a record 16 months, was higher than the 2.8% growth the bank had forecast in January.
South Africa's economy is likely to grow between 2.5% and 3% this year, the South African Reserve Bank's chief economist said Friday, and the bank's current forecast for 3% growth could drop if global conditions worsen.
Mr. Mnyande said the bank's more bullish forecast was driven largely by signs of a stronger recovery in the U.S. and a stabilization of Europe's debt crisis.
Evidence that either of those trends are reversing could prompt the bank to pull its forecast back, Mr. Mnyande said, as could a lower forecast for global growth from the IMF's World Economic Outlook in April.
"I think you'll see in April a somewhat downward revision of the global economy by the International Monetary Fund and then we will look at those figures," Mr. Mnyande said.
In January, the IMF predicted average growth of 3.3% world-wide in 2012.
The South African rand's increased value against the U.S. dollar has helped contain inflation this year, Mr. Mnyande said.
The bank lowered its forecasts for inflation slightly on Thursday, and now predicts that inflation will peak at 6.5% in the second quarter of this year and decline to 5.2% by the end of 2013, compared with a previous forecast of 5.5%.
"It has been a key factor in containing inflation," Mr. Mnyande said of the rand's recent appreciation.
"If things continue to improve Europe, improve in the U.S., we'll definitely be in a better position," Mr. Mnyande said.
He said the bank is also encouraged by the government's plans to invest in infrastructure to boost private-sector investment and job creation.
President Jacob Zuma announced a sweeping program of road, rail and port upgrades to aid businesses, starting with $39 billion in projects to be spearheaded by state-backed rail and port operator Transnet.
"Out of investments in infrastructure there will be some creation of growth and definitely that will also impact positively on employment," Mr. Mnyande said.
Improving economic conditions in the U.S. and Europe would also help South Africa boost growth and focus on cutting into a 23.9% unemployment rate, Mr. Mnyande said.