Wary thumbs-up for SA

17 April 2014 - 09:14 By Reuters
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Johannesburg Stock Exchange.
Johannesburg Stock Exchange.
Image: MICHAEL BRATT

Mining strikes and the subdued appetite for commodities by China will weigh on South Africa's economy this year, but growth will be faster than last year, a Reuters poll indicated yesterday.

The survey of 36 economists forecast that the economy was still on course to expand by 2.5% this year, unchanged from monthly polls since January, despite a strike by platinum miners over pay that began nearly three months ago.

Growth would exceed last year's 1.9% as an improving global economy helped lift exports.

But rising inflation, aggravated by a drop in the rand, means that interest rates are expected to rise further. The central bank lifted the repo rate in January for the first time in about six years.

The poll forecast that the repo rate will rise another 50 basis points to 6% by the end of this year, a prediction unchanged from last month's poll.

The median forecast for rates at the end of 2015 and 2016 was also unchanged, at 7%. Growth should accelerate to 3% next year, according to the poll.

The International Monetary Fund expects global recovery to strengthen this year and next as output in richer nations picks up, but it has warned of rising risks in emerging economies.

The South African current account deficit, which stood at 5.8% of GDP last year, has been a source of concern to investors and heaped selling pressure on the rand earlier this year.

But the poll suggests that the current account deficit will fall to 5.5% of GDP this year before narrowing to 5% in 2015 and 4.8% in 2016. Economists who participated in the poll this week were cautious because of the dispute between unions and platinum mining companies over wages. Mining accounts for more than half of South Africa's exports so a weak first quarter is likely.

Mine workers at Anglo American Platinum, Impala Platinum and Lonmin are on strike, demanding a R12500 salary entry-level wage.

"A lot of it is concern about mining - strikes are continuing and it does not look like there is going to be a quick resolution, holding back output," said Shilan Shah, of Capital Economics.

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