Economists predict 2.5% growth for SA

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Copy of IOL bus mar20 Impala Platinum Independent Newspapers File photo: Supplied

Johannesburg - Mining strikes and more subdued appetite for commodities from China will weigh on South Africa's economy this year although growth will be faster than last year, a Reuters poll showed on Wednesday.

The survey of 36 economists forecast the economy was still on course to expand by 2.5 percent this year, unchanged from monthly polls since January, despite a strike by platinum miners over pay that began nearly three months ago and shows no sign of ending.

Economic growth would be faster than last year's 1.9 percent expansion as an improving global economy helps lift exports. But rising inflation, aggravated by a drop in the rand, means interest rates are also set to rise further after the central bank lifted the repo rate in January for the first in nearly six years.

The poll forecast the repo rate will rise another 50 basis points to 6.00 percent by the end of this year, unchanged from last month's poll.

The median forecast for rates at the end of 2015 and 2016 was also unchanged at 7.0 percent.

BETTER TIMES AHEAD?

Economic growth should accelerate to 3 percent next year, according to the poll.

The International Monetary Fund expects the global recovery to strengthen this year and next as output in richer nations picks up, but has also warned of rising risks in emerging economies such as South Africa.

The South African current account deficit, which stood at 5.8 percent of GDP last year, has been a source of concern for investors, heaping selling pressure on the rand earlier this year.

The poll, though, suggests the current account deficit will fall to 5.5 percent of GDP this year before narrowing further to 5.0 percent in 2015 and 4.8 percent in 2016.

Economists in the poll, taken this week, were cautious due to the dispute between unions and platinum mining companies over wages as mining accounts for more than 50 percent of South Africa's exports, promising a weak first quarter for Africa's second-biggest economy.

Mine workers at Anglo American Platinum, Impala Platinum and Lonmin are out on strike, demanding a more than doubling of monthly wages.

“A lot of it is domestic concerns in the mining sector, strikes are ongoing, it does not look like there is going to be a quick resolution, so it is going to hold back output,” said Shilan Shah from Capital Economics.

“There is also external headwinds such as slow growth in China, which is going to weigh on production of metals in South Africa.”

China's economy grew at its slowest pace in 18 months in the first quarter, data showed on Wednesday.

Reuters



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