"We expect a slightly lower rate of increase this year due to declines in mining and manufacturing, but that would be offset by the capital expenditure programme ...

domestic expenditure also remains strong," senior deputy research head Brian Kahn told parliament's finance committee.

The two sectors contracted in the fourth quarter of 2005, mostly because of relative strength in the rand currency, which is eroding exports.

Africa's largest economy expanded by 4,9 per cent last year - its fastest pace since 1984 - after growing by 4,5 per cent in 2004.

The Treasury has forecast a similar growth rate this year.

SARB Governor Tito Mboweni said at the same occasion that South Africa's economy is growing at a pace slightly above its estimated potential, which may point to "inflationary consequences".

"If we are growing around five per cent ...

in terms of what we currently know we might be a little ahead of our potential output, which technically might mean there are inflationary consequences down the road," he said.

Mboweni also repeated that the country's monetary and financial authorities wanted to see a stable and competitive exchange rate.

"We want to see a competitive and stable exchange rate: nothing more, nothing less," he said in reply to a question from parliament's finance committee.

Mboweni also pointed out that he and Finance Minister Trevor Manuel were the only authoritative official voices for exchange rate policy.

-Nampa-Reuters

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