GDP to slide to 3.1% as global woes bite

Pretoria - South Africa’s gross domestic product (GDP) growth is expected to expand by 3.1 % in 2011, Finance Minister Pravin Gordhan said on Tuesday as he warned the country is vulnerable to slowing global demand and international investment trends.

The figure is a downward revision from the 3.4 % forecast in the 2011 budget delivered earlier this year, Gordhan said.

In the first quarter of 2011, the economy grew at 4.5% on an annual basis. However, it slowed down to 1.3% in the second quarter.

Gordhan admitted that the domestic economy has lost momentum in recent months due to the disruption to world economic activity following the Japanese tsunami, South Africa’s strike activity and moderating household consumption.

“We are living through a deep crisis that has exposed fault lines in the global economy. The pace and progress of recovery is uncertain,” Gordhan said.

“Political decisiveness to enhance growth, manage sovereign debt and recapitalise banks in advanced economies, particularly in the euro currency area, is still not evident. The threat of global contagion is still with us.”

Medium-term pick-up

But growth is expected to pick up over the medium term as global uncertainty subsides and confidence strengthens.

South Africa’s GDP growth is projected to reach 3.4 % next year, 4.1% in 2013 and 4.3% in 2014.

South Africa needs much faster growth which would be sustained over a decade or more, Gordhan said.

This would reduce poverty and unemployment in line with the objectives set out in the new growth path.

Growth must not only be rapid but needs to be inclusive, leading to broadening economic participation and a decline in inequality, Gordhan said.

Realising these goals depends on the private sector becoming more competitive in the rapidly evolving world economy, he said.

Government and state-owned enterprises could create an enabling environment in which businesses could grow and create jobs by providing the necessary infrastructure, delivery of public services and regulatory and competition framework.

“Measures are required to improve spending of capital budgets, change the way network industries operate and promote competition. Education and skills levels need to be strengthened,” Gordhan said. 

 - Fin24