South African Economy Probably Grew at Faster Pace
South Africa’s economy, the largest on the continent, probably grew at a faster pace in the fourth quarter as manufacturing rebounded and consumers benefited from low borrowing costs.
Growth in gross domestic product accelerated to an annualized 3.1 percent from 1.4 percent rate in the third quarter, according to the median estimate of 14 economists polled by Bloomberg. Statistics South Africa is scheduled to publish the data at 11:30 a.m. in Pretoria tomorrow.
Manufacturing (SFPMNSAY), which makes up 15 percent of the economy, probably grew for the first time since the first quarter of 2011 as the central bank kept its benchmark interest rate at the lowest level in more than three decades. Growth is still less than half the 7 percent expansion the government estimates it needs to create 5 million new jobs by 2020.
“It is still very messy and erratic,” Dennis Dykes, chief economist at Johannesburg-based Nedbank Group Ltd. (NED), said in a telephone interview. “We aren’t very optimistic about it being maintained because the underlying factors remain on the negative side.”
The Reserve Bank, International Monetary Fund and National Treasury cut their forecasts for economic growth this year as the debt crisis worsened in Europe, cutting demand from a region that buys about a third of South African manufactured exports. GDP will expand 2.7 percent this year, down from a previous estimate of 3.4 percent, Finance Minister Pravin Gordhan said in his budget speech on Feb. 22.
The rand dropped 0.5 percent to 7.6377 per dollar by 2:15 p.m. in Johannesburg today. The currency has strengthened 6 percent this year. The yield on the benchmark rand bond due in 2015 rose two basis points, or 0.02 percentage point, to 6.68 percent.
South Africa is targeting economic growth of 7 percent to meet a pledge to reduce the jobless rate to 14 percent by 2020 from 23.9 percent currently, the highest of 61 nations tracked by Bloomberg.
The Reserve Bank has kept its repurchase rate at 5.5 percent since November 2010 to help support the economy and keep price pressures in check. Inflation accelerated to 6.3 percent in January, exceeding the central bank’s target of 3 percent to 6 percent for a third month.
Consumer spending, which makes up two-thirds of expenditure in the economy, is benefiting from rising wages, low interest rates and an increase in credit, Gina Schoeman, an economist at Absa Group Ltd. (ASA), said in a telephone interview.
“The demand-led sectors are pulling this economy along,” Schoeman said. “Dynamics in the consumer sector in the last two years have been very robust.”
Retail sales rose 8.7 percent in December from a year ago, compared with 7.2 percent in the previous month, the statistics office said on Feb. 15.
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