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SA to enjoy lower rates for longer

Dec 06 2012 16:58 Reuters

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Johannesburg - South Africa's economic growth is likely to remain subdued next year due to the effects of labour unrest in the crucial mining sector and a weak global economy, a Reuters poll showed on Thursday.

Economists trimmed their gross domestic product growth forecasts to 2.3% for this year from 2.5% in a previous poll a month ago, and to 2.7% for next year from the previous estimate of 2.9%. The growth forecast for 2014 was maintained at 3.5%.

"GDP growth was worse than expected in Q3 and the outlook for the coming quarters is not very promising either, with strikes continuing to affect the mining sector," said Shilan Shah of Capital Economics in London.

Economic growth slowed sharply to 1.2% in the third quarter from 3.4% in the second quarter, weighed down by a 12.7% decline in mining output after wildcat strikes broke out in the world's biggest platinum producer.

The strikes started in August and have mostly ended. They were the most damaging to hit South Africa since apartheid ended in 1994, paralysing platinum production and raising fears that labour unrest will spread to other sectors of the economy.

The South African Reserve Bank (Sarb) has also cut its 2012 GDP growth forecast to 2.5% from the 2.6% it saw in September, and cut its 2013 growth prediction to 2.9%.

The Treasury cut its growth forecast for this year to 2.5% from 2.7%.

On an unadjusted year-on-year basis, the economy grew 2.3% in the third quarter from a revised 3.1% in the second quarter.

"Manufacturing production remains under pressure from weak global demand," Investec's Annabel Bishop wrote to clients.

Most of the economists surveyed said they saw the repo rate unchanged at 5.0% in a year's time, while six of the 19 economists saw a chance of a 50 basis points reduction. The median consensus for 2014 was for the repo rate to end the year at 5.5%.

Inflation is likely to remain within the Reserve Bank's 3% to 6% target range for the next two years, with 2013 averaging the year at 5.58% and 5.39% in the following year, the survey said.

The main Econometer confidence index rose to 261.22 in November from 259.66 the previous month.

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