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Gordhan: SA likely to miss growth target

Jul 23 2012 11:34 Reuters

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Johannesburg - South Africa’s economic growth this year is likely to miss the government’s current forecast of 2.7% as a slowdown in the rest of the world hits exports from Africa’s biggest economy, Finance Minister Pravin Gordhan said on Monday.

“We don’t know what the precise numbers are but certainly the current indications are that growth is likely to be below 2.7%,” Gordhan told Reuters on the sidelines of a conference in Johannesburg.

The central bank on Thursday surprisingly cut interest rates by 50 basis points to 5.0% - its first move since the end of 2010 - citing a weakening domestic and global outlook, and trimmed its own growth forecast to 2.7% from 2.9%.

It added that the risks to that projection were on the downside if the economic stagnation in the eurozone, South Africa’s biggest trading partner, intensified.

Gordhan welcomed the move by the bank, which was given a slightly expanded mandate two years ago to take growth and unemployment into account when setting policy, in addition to an inflation target of 3%-6%.

“It was a very appropriate move and a most welcomed one. In 2010, part of the variation of the mandate of the Reserve Bank was a request that they take into account issues of employment and growth.”

Governor Gill Marcus won rare praise from labour unions for lowering rates on Thursday, even though they complained it was “too little, too late”..

Unions have long called for looser monetary policy and a weaker currency to help create jobs in a country where official unemployment runs at 25%.

Some have even demanded the bank be nationalised to change its mandate from inflation-targeting to job creation.

“Clearly given the limitations in respect of fiscal policy options currently, the Reserve Bank has done the absolutely correct thing in line with central banks in many parts of the world,” Gordhan added.

South Africa slid into a recession in 2009 - its first since the end of apartheid 15 years earlier - and the sputtering recovery may throw up some problems for President Jacob Zuma as he seeks re-election as head of the ruling ANC at the end of the year.

 
pravin gordhan  |  sa economy  |  gdp
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