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Sa's recovery still fragile

By Janice Roberts | Jul 08, 2010 | COMMENTS [ 0 ]

SOUTH Africa's economy is recovering, but the recovery is "fragile and hesitant" Reserve Bank Governor Gill Marcus has said.

SOUTH Africa's economy is recovering, but the recovery is "fragile and hesitant" Reserve Bank Governor Gill Marcus has said.

"Our recovery is substantially dependent on the global recovery and on Europe in particular as a third of our manufactured exports go there," Marcus, pictured, told a breakfast presentation in Johannesburg yesterday.

"A slowdown in Europe is not inconsequential for our economy."

The bank's (SARB) governor said the global economy was at a crossroads.

"The world is in the midst of significant change, and the events in Europe are the most vivid examples of how complex and difficult the current environment is."

While some analysts now saw a double dip as a likely scenario, even the more optimistic ones, who had retained a positive outlook, now had a downside risk built into their forecasts.

"The reality is that we probably never really emerged from the crisis, which is now entering its next phase," Marcus said.

While the inflation outlook for South Africa was presently favourable, the SARB expected inflation to rise in the fourth quarter of 2010.

However, the outlook had enabled the SARB to reduce the repo rate to its lowest level in nominal terms, at 6,5percent, since the late 1970s, Marcus said.

Turning to growth, Marcus said while the outlook remained positive, South Africa's growth was expected to remain much slower than that in many other emerging markets.

"In recent days, a number of analysts have also downgraded their quarterly growth forecasts for this year in the light of global developments." However, she said growth was expected to average around 3percent in 2010.

Marcus added that South Africa's manufacturing sector had led the recovery since the second half of last year, mainly as a result of an export recovery and the outlook therefore depended on global prospects.

"Unfortunately the most recent data shows that manufacturing may be slowing down, and the Purchasing Managers Index is down at 48,4, the fourth consecutive monthly decline, indicating a possible contraction going forward."

The governor said this posed a risk to the growth outlook for the rest of the year.

She said the SARB had decided a wider knowledge was needed by South Africans of the role the bank played.


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