South Africa will probably cut its economic growth forecast for this year to as low as 2 percent as mining strikes and a recession in Europe curb exports, Finance Minister Pravin Gordhan said.
Africa’s largest economy may expand 2 percent to 2.2 percent in 2013, lower than a February estimate of 2.7 percent and down from a 2.5 percent expansion last year, Gordhan said in an interview with Bloomberg TV in Moscow today. Last year’s growth was the slowest since a 2009 recession.
“Growth is likely to be lower,” he said. “We will have to accommodate our spending patterns in line with what our revenue picture shows.”
The government is limiting spending growth for the next three years as strikes in the mining industry and slumping demand from Europe for manufactured exports reduces revenue. Gordhan pledged in his February budget to narrow the fiscal deficit to 4.6 percent of gross domestic product in the year through March 2014 from an estimated 5.2 percent last year.
The Reserve Bank yesterday cut its GDP growth forecast to 2 percent from 2.4 percent and kept its benchmark lending rate at 5 percent, the lowest level more than 30 years. The rand has weakened 14 percent against the dollar this year, threatening to boost inflation and limiting the room policy makers have to stimulate the economy.
The currency gained 0.4 percent to 9.8946 per dollar by 10:54 a.m. in Johannesburg. The yield on the rand debt due in 2026 dropped 10 basis points to 7.89 percent.
Underspending by government departments is aiding Gordhan as he tries to keep the budget gap from ballooning ahead of a presidential election next year. The government also cut the ceiling on growth in government spending to 2.3 percent for the next three years from 2.9 percent.
“That hopefully continues to provide a supporting element to the economy,” Gordhan said.
Waning consumer spending is further limiting economic expansion needed to create jobs in a nation where one in four people doesn’t have one. The economy needs to expand about 7 percent annually through 2020 to lower the unemployment rate to 14 percent, according to government estimates.
The economy expanded at an annualized 0.9 percent in the first quarter, the slowest pace since a 2009 recession. Consumer spending, which accounts for about 60 percent of the economy, slowed to 2.3 percent in the first three months of the year, also the slowest pace since 2009.