SA growth seen at 4,2%

JOHANNESBURG – South Africa’s economic growth rate is likely accelerate to 4,2 per cent in 2005, driven by low interest rates and a possible recovery in exports, the independent Bureau for Economic Research (BER) said yesterday.

Its latest forecast is a marginal revision from its previous forecast of 4,3 per cent. The continent’s biggest economy expanded 3,7 per cent in 2004, its strongest performance since 2000.The BER also said it now saw GDP growth of 3,9 per cent for next year versus a previous forecast of 3,8 per cent.This is closely in line with government forecasts of 4,3 per cent for this year and 3,8 per cent next year.”High business and consumer confidence continue to point to an upbeat short-term economic outlook,” the BER said in a statement, pointing to low interest rates, robust demand and hopes for a recovery in exports.Interest rates are at their lowest level in more than two decades after falling 6,5 percentage points between June 2003 and April 2005 in response to the rand’s strength and slowing inflation.But the rand’s three-year rally against the dollar has reversed somewhat this year, mirroring global currency trends in the face of rising US interest rates.The rand has lost about 14 per cent against the dollar in 2005 to date, a small dent in its huge gains but enough to give exporters some hope, provided global growth picks up.The BER said it saw pressure on the rand because of a widening current account deficit and weaker commodity prices, and forecast an exchange rate with the dollar of 7.50 by the fourth quarter of 2006.The BER also forecast CPIX inflation peaking at 5,4 per cent in the first quarter of 2006.The targeted measure used for monetary policy, CPIX was 3,9 per cent in the year to May – well within its 3-6 per cent target range.But the BER said it saw domestic interest rates rising 100 to 150 basis points during the first half of 2006 “as inflation accelerates close to the upper band of the inflation target”.- Nampa-ReutersThe continent’s biggest economy expanded 3,7 per cent in 2004, its strongest performance since 2000.The BER also said it now saw GDP growth of 3,9 per cent for next year versus a previous forecast of 3,8 per cent.This is closely in line with government forecasts of 4,3 per cent for this year and 3,8 per cent next year.”High business and consumer confidence continue to point to an upbeat short-term economic outlook,” the BER said in a statement, pointing to low interest rates, robust demand and hopes for a recovery in exports.Interest rates are at their lowest level in more than two decades after falling 6,5 percentage points between June 2003 and April 2005 in response to the rand’s strength and slowing inflation.But the rand’s three-year rally against the dollar has reversed somewhat this year, mirroring global currency trends in the face of rising US interest rates.The rand has lost about 14 per cent against the dollar in 2005 to date, a small dent in its huge gains but enough to give exporters some hope, provided global growth picks up.The BER said it saw pressure on the rand because of a widening current account deficit and weaker commodity prices, and forecast an exchange rate with the dollar of 7.50 by the fourth quarter of 2006.The BER also forecast CPIX inflation peaking at 5,4 per cent in the first quarter of 2006.The targeted measure used for monetary policy, CPIX was 3,9 per cent in the year to May – well within its 3-6 per cent target range.But the BER said it saw domestic interest rates rising 100 to 150 basis points during the first half of 2006 “as inflation accelerates close to the upper band of the inflation target”.- Nampa-Reuters