South Africa’s economy will probably avoid a recession even as a strike at the three biggest platinum miners enters its fifth month, Reserve Bank Governor Gill Marcus said.
“It would have to be a very dramatic decrease on the numbers that are already there for us to go into recession,” Marcus told economists and reporters yesterday in Pretoria, the capital. “So we don’t see that happening. Obviously we are concerned about what is taking place.”
The economy contracted for the first time since 2009 in the first quarter as the longest mining strike in the nation’s history hurt production. A second consecutive quarter of negative growth would indicate a recession. Mines remain shut at Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc as about 70,000 workers hold out for higher wages.
The South African Reserve Bank said it faces difficult policy choices in an environment of rising consumer prices and weak economic growth.
“The inflation outlook has deteriorated and inflation is expected to remain outside the target for an extended period,” the bank said in its biannual Monetary Policy Review yesterday.
The bank left its benchmark repurchase rate unchanged at 5.5 percent for a second consecutive meeting last month as growth concerns outweighed worries about inflation. Consumer prices rose 6.1 percent in April, exceeding the 6 percent upper limit of the bank’s target. The inflation band is broad enough to meet economic challenges and doesn’t need to be changed, Marcus said.
The Reserve Bank increased interest rates in January for the first time in more than five years as a weaker rand fueled inflation. Monetary policy is in a rising interest-rate cycle, the bank said yesterday.
The rand was little changed at 10.7608 against the dollar as of 8:41 a.m. in Johannesburg today, taking its decline this year to 2.5 percent.