Sarb: Growth will be strained

Pretoria - The South African Reserve Bank (Sarb) reiterated on Thursday that future economic growth will be strained.

In the introduction to its first 2010 Quarterly Bulletin, the central bank stressed that the global focus has shifted from bolstering economic recovery to addressing fiscal and sovereign debt extremes. This raises concerns around the sustainability of expansionary policies.

"In Europe the large underlying fiscal deficit and high public sector debt in a number of countries fuelled a marked deterioration in investor confidence in these countries' debt instruments, with the worst fears applying to Greece," the bank said.

Sarb, however, noted that progress has been made in financial markets since European authorities and the International Monetary Fund announced a bail-out package.

But it said that not even strong growth in countries such as China and India was enough to keep global economic activity at previous years' highs.

"The world economy nevertheless still operated well below capacity and global inflation remained low," it said.

South Africa's economy grew at 4.6% in the first quarter of this year, supported by the manufacturing sector. Sarb stressed on Thursday that African economies have continued to benefit from rising demand for exports and generally buoyant commodity prices.

It said real gross domestic expenditure had supported the strong growth in SA's case.

But a concern is that the recovery in economic activity has not yet been reflected in rising aggregate employment numbers.

 - I-Net Bridge