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Cape Town - South Africa is on track to achieve growth of 3.4% this year, Finance Minister Pravin Gordhan said on Tuesday, although he added that he was concerned about the impact of the rumbling debt crisis in Europe.
Gordhan told parliament that while South Africa's moderate inflation created a basis for interest rates being at historical lows, he was worried about the impact of inflation from key trading partners China and India.
"While much of the developed world has growth of less than 3%, in South Africa we are still moving in the right direction and unless something untoward happens we will still hopefully achieve the 3.4% growth that we've been talking about," Gordhan said.
"However, for many months now, indeed for almost a year, we've been concerned about the sovereign risk in Europe ... and then more recently the increasing potential for inflation impacting negatively in countries such as India and China."
The Reserve Bank has kept interest rates steady so far this year, after lopping off 650 basis points between December 2008 and December 2010 to bring the economy out of a steep downturn. Some analysts now see rates rising by year-end as inflation pressures rise.
The central bank said on Tuesday it was still concerned about relatively high levels of bad debts in South Africa, although the banking sector remained adequately capitalised.
Gordhan said the economy, which in February projected a wider budget deficit of 5.3% of GDP in the fiscal year to March 2012 than the 4.6% seen earlier, would have to take a "sterner look" at its own spending.
Treasury Director-General Lungisa Fuzile said the government wanted to keep debt service costs at "sustainable" levels between 2.6% and 2.9% of GDP over the next three years.
He said South Africa's total debt was expected to rise above R1.4 trillion ($202 billion) over the next three years.
Gordhan told parliament that while South Africa's moderate inflation created a basis for interest rates being at historical lows, he was worried about the impact of inflation from key trading partners China and India.
"While much of the developed world has growth of less than 3%, in South Africa we are still moving in the right direction and unless something untoward happens we will still hopefully achieve the 3.4% growth that we've been talking about," Gordhan said.
"However, for many months now, indeed for almost a year, we've been concerned about the sovereign risk in Europe ... and then more recently the increasing potential for inflation impacting negatively in countries such as India and China."
The Reserve Bank has kept interest rates steady so far this year, after lopping off 650 basis points between December 2008 and December 2010 to bring the economy out of a steep downturn. Some analysts now see rates rising by year-end as inflation pressures rise.
The central bank said on Tuesday it was still concerned about relatively high levels of bad debts in South Africa, although the banking sector remained adequately capitalised.
Gordhan said the economy, which in February projected a wider budget deficit of 5.3% of GDP in the fiscal year to March 2012 than the 4.6% seen earlier, would have to take a "sterner look" at its own spending.
Treasury Director-General Lungisa Fuzile said the government wanted to keep debt service costs at "sustainable" levels between 2.6% and 2.9% of GDP over the next three years.
He said South Africa's total debt was expected to rise above R1.4 trillion ($202 billion) over the next three years.
