Fi­nan­cial ex­perts say im­prov­ing SA econ­omy sig­nals end of re­ces­sion

Weekend Argus (Saturday Edition) - - LIFE -

THERE may be a light at the end of the tun­nel as South Africa, prob­a­bly reg­is­ter­ing a slight pos­i­tive growth for this quar­ter, moves to nudge its way out of re­ces­sion.

South Africa has reg­is­tered three con­sec­u­tive quar­ters of neg­a­tive growth this year, but a Reuters sur­vey of 17 economists in­di­cated that on av­er­age, they ex­pected this quar­ter’s growth fig­ure to be 0.2 per­cent, ef­fec­tively end­ing the re­ces­sion.

The economists fore­casts ranged from pre­dic­tions of a con­trac­tion of 1.2 per­cent to pos­i­tive growth of 2.0 per­cent.

Both the Na­tional Trea­sury and the cen­tral bank ex­pect South Africa’s re­ces­sion to end in the next quar­ter, with an over­all con­trac­tion of 1.9 per­cent seen for 2009 af­ter the econ­omy grew by 3.1 per­cent last year.

“We ex­pect to see the do­mes­tic econ­omy mov­ing out of re­ces­sion in the third quar­ter of 2009, al­beit at a moderate pace and we ex­pect this to re­cov­ery to gather mo­men­tum into the new year,” said Luke Doig, se­nior man­ager for in­vest­ments and eco­nomic ser­vices at Credit Guar­an­tee In­sur­ance Corp.

Growth would have been boosted by gold min­ing and man­u­fac­tur­ing, which would most likely have shown pos­i­tive growth, but this could be off­set by slug­gish growth in other sec­tors, said Stan­dard Char­tered’s Razia Khan.

“While agri­cul­ture could prove to be the swing fac­tor – it is al­ways dif­fi­cult to pre­dict – it is likely that quar­ter-on-quar­ter growth was flat,” said Khan, who was one of four an­a­lysts who fore­cast no growth for the third quar­ter.

The cen­tral bank has slashed in­ter­est rates by 500 ba­sis points since De­cem­ber last year to help the ail­ing econ­omy, fol­low­ing a two-year pe­riod of in­creases to June 2008 as it tried to min­imise inflation.

Con­sumer inflation data has been out­side the de­sired 3-6 per­cent corridor since April 2007, but has steadily edged lower since peak­ing at nearly 14 per­cent in Au­gust last year. The Reuters poll found the Con­sumer Price In­dex gauge should brake slightly to 5.9 per­cent year-on-year in Oc­to­ber, thus fall­ing back into tar­get.

“There is very lit­tle new in­for­ma­tion com­ing from sur­veys in Oc­to­ber into the inflation data (but) with a 40c/litre petrol price cut (for the month), any up­ward price pres­sure… will be sub­dued,” said In­vestec econ­o­mist Annabel Bishop.

The cen­tral bank said this week while there might be tem­po­rary de­clines to within the tar­get range in com­ing months, CPI is only due to fall in­side the band on a sus­tain­able ba­sis in the sec­ond quar­ter of 2010.

The bank has kept rates un­changed in the last three pol­icy meet­ings since Au­gust, cit­ing in­fla­tion­ary pres­sures em­a­nat­ing from pos­si­ble in­creases in elec­tric­ity prices. – Reuters

UP­BEAT: Luke Doig pre­dicts eco­nomic re­cov­ery soon.

POS­I­TIVE: Razia Khan sees signs of eco­nomic re­cov­ery.

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