SA economy better off: Gordhan

Pretoria - Finance Minister Pravin Gordhan is far more upbeat in his latest assessment of the economy than he was in the February budget, revising growth forecasts up for this year and the next three years.

Gordhan expected gross domestic product (GDP) to grow 3% this year, 3.5% in 2011, 4.1% in 2012 and 4.4% in 2013. This compares with February forecasts of 2.3% for this year, 3.2% for 2011 and 3.6% for 2012.

The economic recovery strengthened in the first half of the year, with real GDP growth expanding at an annualised rate of 3.9% compared with the second half of 2009.

Growth was stronger than expected in the first six months of 2010 as a result of temporary factors, including an uptick in consumption related to the 2010 Fifa World Cup and more stable inventories. The pace of GDP growth is likely to moderate in the second half of the year, before picking up in 2011.

While the level of real GDP returned to pre-crisis levels in the second quarter of this year, it will take some time before the economy reached full capacity, the medium-term budget policy statement said.

Inflation had also been revised downwards, with the average expected for this year now at 4.4% against a high 5.8% in February. He expected inflation to average 4.7% in 2011 against a previously bearish forecast of 6.1%. The rate is the nexpected to rise to 5% in 2012 and 5.2% in 2013.

Gordhan noted that the global recovery was fragile and marked by persistent global imbalances. The world economy was expected to grow at a relatively strong pace of 4.8% in 2010 and 4.2% in 2011.

In South Africa, stronger spending by households and income from high commodity prices had been supported by expansionary fiscal and monetary policies and low inflation. Investment by state-owned enterprises had been sustained. Employment and private investment were expected to rise gradually as growth accelerated. 
 
 - Fin24