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Minister of Cooperative Governance and Traditional Affairs Des Van Rooyen. Picture Credit: Gallo Images
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'Another interest rate hike seems likely in the near future'

By unknown | Nov 29, 2006 | COMMENTS [ 0 ]

Gordon Bell

Gordon Bell

South Africa's economic growth fell in the third quarter, but remained healthy despite higher interest rates, while revisions of previous numbers pointed to an economy expanding faster than previously thought.

Gross domestic product (GDP) grew by 4,7 percent during the quarter, down from 5,5 percent in the second quarter, Statistics South Africa (Stats SA) said yesterday.

The quarterly figure was in line with forecasts, but year-on-year growth of 4,5percent beat predictions, buoyed by continued strong domestic demand.

Stats SA also announced revisions to GDP estimates for 2004 and last year, which showed that the economy grew by 5,1 percent last year reinforcing a two-decade high. Growth in 2004 was revised to 4,8percent from 4,5 percent.

Analysts said the data pointed to a strong economy, which should support the rand and stock market, but also suggested there was room for more interest rate hikes in the near term.

"I'd imagine that with figures like this the reserve bank will not have any problems next week hiking interest rates," Brait economist Colen Garrow said.

"Overall, the economy is performing at a much brisker pace than the markets are discounting. It would certainly give foreigners greater appetite to get more involved in our markets, particularly equity markets," he said.

The reserve bank has hiked its repo rate by 150 basis points since June to tame rising inflation fuelled largely by a consumer spending boom. It is widely expected to lift the rate another half percentage point to 9 percent when its policy committee meets next week. - Additional reporting by Stella Mapenzauswa and Phumza Macanda, with Reuters


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