IMF sees robust South African growth ahead

WASHINGTON – South African economic growth was likely to remain robust, the International Monetary Fund said on Thursday, forecasting 4,3 per cent growth for Africa’s biggest economy in 2005.

“(IMF) directors saw South Africa’s near-term economic outlook as favourable,” the fund said in its annual economic review for South Africa. It said the higher growth rate – from 3,7 per cent last year – would be boosted by low interest rates, a moderately expansionary fiscal policy and a healthy world economy.The global lender said there was space for a moderate increase in government spending after sound management of the budget over the past years.The additional spending should be well targeted at social areas and on infrastructure to boost productivity, it added.The fund said inflation targeting had gained credibility, which was evident from declines in inflation expectations.It suggested that South Africa target inflation at the mid-point of the band over the medium-term that would help anchor the expectations and increase the effectiveness of monetary policy.The IMF cautioned, however, that higher oil prices, a further weakening of the rand and a pickup in unit labour costs were risks to inflation.It urged the central bank to stand ready to adjust rates, if needed, to keep inflation within the target band.The IMF again nudged South Africa to relax remaining capital restrictions, which the government fears may spark an outflow of foreign exchange.The fund had few words on the rand, only pointing out that the flexible exchange rate had been integral in helping inflation targeting and cushioning the economy against shocks.”(IMF) directors share the authorities’ view of seeking competitiveness gains through measures that raise productivity and reduce costs,” the IMF said.It said it supported an additional accumulation of international reserves, but noted it may require analysis.The IMF said progress in the government’s land reform program had become more limited and said it was vital to move it forward at a faster pace.-Nampa-ReutersIt said the higher growth rate – from 3,7 per cent last year – would be boosted by low interest rates, a moderately expansionary fiscal policy and a healthy world economy.The global lender said there was space for a moderate increase in government spending after sound management of the budget over the past years.The additional spending should be well targeted at social areas and on infrastructure to boost productivity, it added.The fund said inflation targeting had gained credibility, which was evident from declines in inflation expectations.It suggested that South Africa target inflation at the mid-point of the band over the medium-term that would help anchor the expectations and increase the effectiveness of monetary policy.The IMF cautioned, however, that higher oil prices, a further weakening of the rand and a pickup in unit labour costs were risks to inflation.It urged the central bank to stand ready to adjust rates, if needed, to keep inflation within the target band.The IMF again nudged South Africa to relax remaining capital restrictions, which the government fears may spark an outflow of foreign exchange.The fund had few words on the rand, only pointing out that the flexible exchange rate had been integral in helping inflation targeting and cushioning the economy against shocks.”(IMF) directors share the authorities’ view of seeking competitiveness gains through measures that raise productivity and reduce costs,” the IMF said.It said it supported an additional accumulation of international reserves, but noted it may require analysis.The IMF said progress in the government’s land reform program had become more limited and said it was vital to move it forward at a faster pace.-Nampa-Reuters