South African eco­nomic growth slows

The Pak Banker - - Front Page -

JO­HAN­NES­BURG

South Africa's econ­omy, the con­ti­nent's largest, grew at the slow­est pace since a re­ces­sion in 2009, as min­ing out­put plunged fol­low­ing the worst strikes since the end of apartheid.

Strikes at gold and plat­inum mines this year have cut out­put by more than 10 bil­lion rand ($1.1 bil­lion) and will shave about 0.5 per­cent­age point off the eco­nomic growth rate, ac­cord­ing to the Na­tional Trea­sury. Fi­nance Min­is­ter Pravin Gord­han is fore­cast­ing ex­pan­sion of 2.5 per­cent this year, the slow­est pace since a 2009 re­ces­sion. That's less than half the 7 per­cent growth the government says is needed to slash a 25.5 per­cent job­less rate.

"The scary bit is if you ex­clude min­ing from the econ­omy in the third quar­ter, you still would've seen a slow­down," Gina Schoe­man, an econ­o­mist at Cit­i­group Inc. in Lon­don, said in a tele­phone in­ter­view. "Even though min­ing is such a drag, there is no doubt that the rest of the econ­omy is los­ing mo­men­tum."

The rand pared its gains af­ter the data was re­leased, drop­ping to 8.86 per dol­lar and was trad­ing at 8.8369 as of 11:56 a.m. in Jo­han­nes­burg. The yield on the R157 government bond, due 2015, de­clined one ba­sis point, or 0.01 per­cent­age point, to 5.5 per­cent.

Min­ing plunged an an­nu­al­ized 12.7 per­cent in the third quar­ter af­ter ex­pand­ing 31 per­cent in the pre­vi­ous three months, the statis­tics of­fice said. Man­u­fac­tur­ing, which makes up 15 per­cent of the econ­omy, rose 1.2 per­cent com­pared with a 0.8 per­cent con­trac­tion in the sec­ond quar­ter.

"If you ex­clude min­ing we could have been grow­ing 2 per­cent," Kedibone Mabaso, man­ager of na­tional ac­counts data at the statis­tics agency, told re­porters in Pre­to­ria to­day.

Last quar­ter's growth rate was the slow­est since a con­trac­tion of 2.7 per­cent in the sec­ond quar­ter of 2009.

The government and cen­tral bank have lit­tle room to stim­u­late the econ­omy as growth slows. While the Re­serve Bank sur­prised econ­o­mists by low­er­ing the re­pur­chase rate by 50 ba­sis points on July 19, Gov­er­nor Gill Mar­cus has held the rate at 5 per­cent since then be­cause of a weaker rand and quick­en­ing in­fla­tion.

"The slow­down is oc­cur­ring in the econ­omy, but it isn't nec­es­sar­ily that fast," Peter At­tard Mon­talto, an econ­o­mist at No­mura Plc in Lon­don, said in a phone in­ter­view. "This isn't pro­vid­ing enough of a shock yet for the Re­serve Bank to cut rates in Jan­uary."

Gord­han has pledged to keep the bud­get deficit un­der con­trol as South Africa faces scru­tiny from credit rat­ing agen­cies.

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