S.Africa lowers economic growth forecast
2013-10-24 16:36:22
South Africa's economic growth is expected at 2.1 percent this year, down from 2.7 percent as previously predicted, Finance Minister Pravin Gordhan said on Wednesday.
"We now expect growth of about 2.1 percent in the South African economy this year," Gordhan said in his Medium Term Budget Policy Statement in Parliament.
The country's economic growth is expected to rise to 3.5 percent by 2016, he said.
Several factors contribute to the slowdown in economic growth, Gordhan said.
"Global economic activity remains subdued. In the euro area, which is our main trading partner, GDP growth of one per cent is expected next year, after negative growth during much of 2012 and 2013," he said.
The IMF has revised down the 2013 growth outlook for developing countries from 5 percent to 4.5 percent.
"Our economic prospects are interconnected with these global trends. As the United States tapers its quantitative easing program and starts to raise interest rates, this will impact on our debt costs and might cause further volatility of the rand.
"And so we have emphasized in recent engagements with our international partners that progress towards a better future requires greater global cooperation and greater respect for the interdependence of industrialized and emerging economies," Gordhan said.
Muted economic growth has translated into limited gains in job creation. The quarterly labor force survey indicates an increase in employment of about 275,000 in the year to July, but formal non- agricultural employment growth has been slow.
A trade deficit of 2.6 percent of the GDP was recorded in the first half of 2013, contributing to a deterioration in the current account of the balance of payments to about 6 percent of the GDP, said the minister.
He also projected gross fixed capital formation to increase by about four percent this year, mainly driven by public sector infrastructure projects.
Private sector investment growth remains subdued, but should gather momentum over the period ahead, he said.
Consumer price inflation is expected to average 5.9 percent in 2013, and to remain within the 3 to 6 percent target band next year, said Gordhan.