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Brighter outlook for SA growth

Johannesburg - Upbeat economic data released recently strongly suggest that South Africa's gross domestic product (GDP) growth accelerated towards 4% quarter-on-quarter in the final quarter of 2010, the Bureau for Economic Research (BER) said on Thursday.

The more upbeat data followed a loss of momentum in mid-2010, when the economy expanded by only 2.6% in the third quarter.

It added that growth of 4% in the fourth quarter would result in the economy expanding by 2.7% for 2010 as a whole, following the 1.7% contraction recorded in 2009.

"Importantly, the growth recovery to date has not been broad-based with robust consumer spending providing most of the impetus, while fixed investment remains poor, albeit slowly gaining traction," the BER said.

Despite concerns about the debt crisis in the European Union and rising fears about inflation, global economic prospects had also improved, it said.

The BER has raised SA's GDP growth forecast to 3.8% from 3.4% for 2010

"The improved outlook stems mainly from a more optimistic projection of household consumption expenditure," it said.

GDP growth is expected to remain just below 4% at 3.9% for 2012, it forecast.  

Consumer spending is set to rise in 2012, while investment by businesses is also anticipated to increase.

"The improved GDP performance should be accompanied by employment growth, but with output growth projected to remain below 4%, only modest employment gains are expected," it said.

While the consumer price inflation (CPI) remained well within the Reserve Bank's 3% to 6% target band, it is expected to rise close to 6% in the second half of the year due to higher fuel and food prices.

It noted that the rand exchange rate had outperformed its peer currencies in December 2010, but had weakened sharply in 2011.

The rand is expected to end 2011 at around current levels of R7.30/$.

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