Johannesburg - Talk of a recession in the country was "alarmist", Business Unity SA (Busa) said on Thursday.
"Since a recession is usually defined as two consecutive quarters of negative growth, Busa agrees that talk of an economic recession in SA is premature and unnecessarily alarmist," it said in a statement.
In assessing the current economic outlook, Busa said that while there were indisputable signs of a serious and rapid slowdown in economic and business activity in 2008, the overall growth outlook remained positive.
"There are sufficient growth factors in the economy ... and several recent surveys have suggested that, although business conditions are seen as unfavourable, no major further deterioration was expected by business respondents in several sectors of the economy in the months ahead."
Although the bulk of the focus has recently been on the sharp decline in consumer spending, Busa's evaluation of South Africa's economic prospects was based on the still positive outlook for agriculture this year as well as the apparent greater reliability in electricity supply in the months ahead - given the negative economic impact of power outages in the first half of 2008.
These prospects were also underpinned by the continued high level of capital investment, especially the R500bn infrastructural investment planned over the next three years, Busa said.
On present economic evidence, Busa saw economic growth in South Africa of not less than three percent in 2008 as well as in 2009.
Busa said it recognised that the risks in the global economic environment remained high and that South Africa was not entirely immune to these factors.
"Yet SA is to some extent insulated from the global economic growth slowdown, as the main drivers of SA's recent economic growth have largely been internal and international commodity prices have remained relatively high."
However, Busa pointed out that the large deficit on the current account of the balance of payments remained a serious vulnerability.
Busa accepted that several of the pressures on the economy, such as rising oil and food prices, were not unique to South Africa.
"Nonetheless, SA can mitigate these pressures if they are promptly addressed. Structural steps to boost agricultural production as well as urgent short term social relief measures should be considered and implemented as part of the adjustment process to changing economic conditions."
Busa said that one of the options was the introduction of a national food stamp system in South Africa.
Busa also believed that South Africa was relying too heavily on interest rates to drive the adjustments in the economy.
"The rapid and effective implementation of supply-side measures to boost production would help to stabilise the economy and reduce the need for further interest rate increases."
In any case, while Busa supported the inflation targeting regime, there was now overwhelming evidence that the previous interest rate rises have had a substantial impact on the economy.
"Their cumulative effect should be given more time to show results before interest rates are raised again," it said.
- Sapa