Fin24

Labour strife knocks SA growth forecast

2012-11-08 11:54

Johannesburg - Confidence in South Africa’s economy has fallen in the last month, a Reuters poll showed on Thursday, as spillover from the worst mining strikes since apartheid hit growth forecasts for the next two years.

The Reuters Econometer, a confidence gauge based on six weighted indicators that looks two years ahead, fell to 259.66 in October from 263.26 in September.

Three months of labour unrest in the mines have hit platinum and gold output, undermined growth in SA's economy and triggered two ratings downgrades.

The median forecast for gross domestic product growth for this year remained constant at 2.5%, with the most bearish economist predicting 2.2%.

The treasury cut its 2012 growth forecast to 2.5% in October from 2.7%, reflecting infrastructure bottlenecks and the impact of the platinum and gold strikes.

In the survey of 19 economists, the average growth projection for next year fell to 2.9% from 3.0% and in the following year it edged down to 3.5% from a previous forecast of 3.7%.

“GDP growth for especially 2013 was revised down as exports and private sector fixed investment is set to be weighed down by lingering impact of the current industrial strife,” said Hugo Pienaar, an economist at the Bureau for Economic Research.

Inflation is likely to average 5.59% this year from a previous 5.51%t forecast, while the average for next year is seen at 5.53% from 5.29% projected in September.

“We were surprised by the high figure in September, which obviously increased the average year forecast,” said Ilke van Zyl, an economist at Absa Capital.

Consumer inflation surprised on the upside in September, accelerating to 5.5% year-on-year from 5% in August as food and housing costs increased more than anticipated.

Changes in weightings of the consumer price index basket that come into effect next year may also lift the headline inflation rate, with weighting of electricity and other fuels rising.

The survey showed that economists’ interest rate expectations remained unchanged, with the Reserve Bank’s repo rate seen at 5.0% this year and next and 6.0% at the end of 2014.