South Africa growth weak, factory output vulnerable - SARB

"The manufacturing sector remains susceptible to renewed weakness in the global economy, particularly in the euro area, through possible declines in exports"

Growth in South Africa’s economy remains “pedestrian”, with the manufacturing sector vulnerable to weak global growth because of its impact on exports, the Reserve Bank said on Monday.

While inflation has moderated, food prices were likely to stay elevated for the rest of the year due to higher transport, electricity and refrigeration costs and wage increases, the Bank said in its 2012 annual economic report.

The report reviews economic development over the last 18 months and comes four days after the Bank unexpectedly cut its benchmark interest rate to 5,0% and lowered its 2012 growth forecast to 2,7% from 2,9%.

“The manufacturing sector remains susceptible to renewed weakness in the global economy, particularly in the euro area, through possible declines in exports,” the Bank said.

Manufacturing accounts for about 15% of Africa’s largest economy.

The central bank also blamed subdued domestic growth on infrastructure bottlenecks.

South Africa’s inclusion from October in Citigroup’s World Government Bond Index should give it a larger and more diversified investor base which could raise capital inflows and support the raising for funds for infrastructure, it added.