Tito: SA's recovery lags

Pretoria - There are tentative signs of an economic recovery, but these signs should not be over-emphasised.

In Pretoria on Thursday Reserve Bank Governor Tito Mboweni told a press conference after the bank's 89th annual general meeting that the economy could begin to recover in the next few months.

But he warned that South Africa's recovery effort would lag that in other countries.

"Although the worst of the global downturn is apparently over, the recovery is expected to be slow and drawn out," he declared in his governor's address.

Although the domestic economy looks set for a moderate recovery in the coming months, the pace of decline in the inflation rate will be hampered by high and sustained administered price increases and above-inflation wage settlements.

"The global recovery has not progressed much and the US is still deep in recession, even though some of our overseas colleagues reckon the worst is over."

Dr Ben Bernanke, chairman of the American Federal Reserve on Tuesday declared that the recession was in all probability over.

Mboweni refused to comment on inflation prospects and said these would be discussed only at next week's meeting of the Monetary Policy Committee.

But he did say that the strength of the rand was good for inflation.

According to him, the Reserve Bank will not go out of its way to artificially improve the currency's position.

In fact, he warned that its spectacular strengthening (28% against the American dollar since January) may have been overdone.

"Although we remain committed to a flexible exchange rate whose value is determined by the market, we are increasingly concerned about the imbalances that can arise from current trade levels. We are looking into this."

But Mboweni stated that the bank remained committed to inflation-targeting and price stability.

Consumer price inflation has been outside the bank's target range of 3% to 6% since early 2007.

Economists expect that the August consumer price inflation figure, which will be announced next Tuesday, will be considerably lower than July's 6.7%, since last year inflation had peaked during August.

The sharp decline in international oil prices at the end of 2008 could result in inflation again rising towards the end of this year because it would be measured against a lower base, Nedbank economist Dennis Dykes warned earlier in the week.

- Sake24.com

For more business news in Afrikaans, go to Sake24.com.