South Africa's Bureau for Economic Research (BER) has revised downward its forecast for real economic growth for the country in 2003 to 2.2% y/y from 2.6% previously, due to the stronger-than-expected slowdown experienced over the first half of the year.
In its latest economic forecast for South Africa, released on Wednesday, the BER said, however, that the demand side of the economy remained resilient and the expected macroeconomic environment was favourable, which should benefit domestic production conditions over the short-term.
The economy was expected to re-accelerate towards the end of the year, with real GDP growth projected at 3.5%y/y in 2004.
CPIX inflation was forecast to decelerate to average 5.4% in 2004, within the official target range of 4-6%, the BER added, and the organisation expected another 300 basis points of cuts in interest rates between August 2003 and February next year. Under these conditions, and should the world economy continue to recover, the current economic slowdown was unlikely to evolve into a recession, it said.
The BER said the domestic real economic situation deteriorated significantly over the past three quarters, as particularly the production side of the economy came under pressure from the weak world economic conditions, the strengthening rand exchange rate and the higher level of interest rates.
The economic slowdown had been stronger than expected.
In the main, the tradable goods producing sectors (e.g. mining and manufacturing) were under pressure from the strong rand and the weak world economy, however, apart from these sectors the economy was far from a recession, the group noted.
There appeared to be resilience in domestic demand conditions, as the growth in real household consumption expenditure was
measured at 2.5% (quarterly annualised) during the first quarter of 2003 and real gross domestic fixed investment at 8.5%.
Whilst mining and manufacturing fixed investment was expected to slow down, real domestic expenditure should receive a boost from lower interest rates and inflation going forward apart from the substantial tax cuts already in the system. Consumer confidence was trending upwards.
"Prospects for real domestic expenditure therefore remain favourable given the expected macro environment and the production side of the economy should benefit," the BER said. "To the extent that the world economic recovery
remains sluggish and the rand strength persists, the recovery in the mining and manufacturing sectors will be dampened.
"We do not expect a strong recovery during the third quarter, however, towards the end of the year the broader economic conditions should improve bar unforeseen developments on the external front."
The BER emphasises that whilst the real economic performance is likely to be weaker this year compared to 2002, they do not anticipate a recession. World economic conditions are also expected to improve, albeit likely that this will be a modest affair.
The BER decided to scale down their growth forecast for 2003, given the stronger than expected slowdown during the first half of the year. Real GDP growth was forecast to decelerate to 2.2% in 2003 (from 3% in 2002) and then to accelerate to 3.5% in 2004.
The BER pointed out that whilst growth for 2003 was weaker than previously projected (2.6%), they did not find reason at this stage to scale down their growth forecast for next year.
I-Net Bridge
Publisher: Business Day
Source: Business Day
SA economy likely to grow at 2.2% in 2003: BER
Posted On Wednesday, 16 July 2003 02:00 Published by eProperty News
South Africa's Bureau for Economic Research (BER) has revised downward its forecast for real economic growth for the country in 2003 to 2.2% y/y from 2.6% previously, due to the stronger-than-expected slowdown experienced over the first half of the year.
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