IMF upbeat about SA growth

Johannesburg - The International Monetary Fund's Article IV Report released on Wednesday projects economic growth as moderate at 3.8% for 2008 and 3.7% for 2009.

This, however, is slightly better than the National Treasury's projection of 3.7% for 2008 and only 3% for 2009. For 2010, the National Treasury forecasts growth of 4% and for 2011 growth of 4.3%.

The report states that since the beginning of 2008, the economy has been buffeted by a series of economic shocks. It says real GDP growth has slowed down in 2008 having been affected by both domestic conditions and the current global economic environment.

It regards the major risks to the economy and its forecast as power supply constraints, lower demand in partner countries, the cumulative effect on consumption of a tightening monetary policy and elevated debt service burdens among households.

It highlights however that South Africa has not been immune to the inflationary pressure arising from increases in global food and oil prices. Since breaching the 3% to 6% inflation target in April 2007, inflation has continued to rise, but is expected to peak later this year before beginning a downward trajectory.

The IMF forecasts CPIX of 11.3% for 2008 and CPI of 9.2% for 2009. It sees inflation down at 6.5% in 2010 and 4.8% in 2011.

The National Treasury projects CPIX of 11.6% for 2008 and CPI of 6.2% in 2009, which is much lower than the IMF's forecast. For 2010 and 2011, it forecasts CPI of 5.3% and 4.7% which are also lower than the IMF's projections.

The IMF projects the current account deficit at 9% of GDP in 2008 and 9.6% in 2009, compared to the National Treasury's more optimistic 2008 budget forecast of 7% to 8% of GDP. The rising current account deficit and inflation pose a critical challenge in the period ahead if we want to continue to accelerate growth and spur job creation. It supports current policy by the SARB and National Treasury to build up of reserves when market conditions are favourable.

- I-Net Bridge