SA's exchange rate overvaluation has exacerbated pressures on the country's current account deficit and increased its vulnerability to future shocks, cautions Deputy Finance Minister Nhlanhla Nene.
Nene was addressing the G20 development conference on infrastructure and inclusive growth in Cape Town on Wednesday.
South Africa's current account deficit widened to -3.1% of GDP in the first quarter of 2011 from a -0.1% deficit in the last quarter of 2010.
He said the current environment was characterised by “a great deal of uncertainty.”
SA's economic recovery was on course, Nene told the conference, but added that the foundations of the 4.8% growth rate in the first quarter of 2011 were not yet sustainable and was still highly dependent on support from expansionary fiscal and monetary policies.
“What helped pull the world away from a potentially deeper and even longer crisis was the cooperation and coordination among G20 members,” said Nene.
He noted that G20 members were increasingly appreciating that their cooperation should not be restricted to issues that only affect the membership.
“Broadening our thinking beyond systemic and structural issues affecting the global real economy is not only in the global public interest, but should also support our own national objectives for growth and employment,” said Nene.
French President Nicholas Sarkozy recommended to the G20 that infrastructure, food security and commodity price volatility be considered the key issues for the group in 2011. Nene said these issues were “highly relevant” to the development challenges and opportunities in the region. - I-Net Bridge