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Economic growth seen subdued in 2013

Jan 17 2013 14:36 Reuters


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Johannesburg - South Africa's interest rates are likely to stay this year as the Reserve Bank looks to curb rising inflation amid subdued economic growth, a Reuters poll found on Thursday.

Weak domestic demand is expected to limit economic expansion to 2.60% in 2013, the survey of 21 economists showed, shaving a tenth of a percentage point from the previous forecast last month.

"We believe that consumers are still under pressure, and that their spending will continue to lose momentum," said Elna Moolman, economist at Renaissance Capital in Johannesburg.

The South African Reserve Bank (Sarb) is expected to keep its repo rate unchanged at 5.00% for the rest of this year, before rising to 5.50% by the end of 2014.

The Sarb kept its benchmark repo rate unchanged at 5.00% - a four decade low - in November as above-inflation wage settlements helped calm the worst mining unrest since apartheid.

"In the context of inflation that might temporarily spike above the target ceiling (of 6%), we do not expect further relief from the Sarb despite the weakness in the economy," Moolman said.

The survey forecast higher average annual consumer inflation in 2013 than last month, of 5.69% compared with 5.58%.

"There is the possibility of breaching (3%-6% target band) in the middle part of the year, (but) then it is likely to come down again," said Hugo Pienaar, economist at the Bureau for Economic Research.

"It is the combination of the lag impact of higher maize prices, both internationally and locally, also the sustained weaker level of the rand that is likely to feed through to some of the CPI components."

The rand has shed almost 5%against the dollar since the start of 2012, hit by a ballooning current account deficit and the labour unrest.

Inflation is seen averaging 5.50% next year from a previously anticipated 5.39%.

The Econometer, a confidence gauge based on six weighted indicators that looks two years ahead, was relatively steady at 261.53 in December from 261.22 in November.

For 2012, the treasury forecast 2.5% economic growth, reflecting infrastructure bottlenecks and the impact of nearly three months of strikes in the platinum and gold mines last year.  

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interest rates  |  sa economy  |  gdp
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