Financial experts say improving SA economy signals end of recession
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.