SARB expects slower economic growth

1 November 2012

While South Africa’s economic activity expanded in the second quarter, economic growth is likely to slow in the coming months, says the Reserve Bank.

“Domestic economic activity is expected to moderate from the second to the third quarter of 2012,” the central bank said in its October Monetary Policy Review, released on Tuesday.

South Africa’s real gross domestic product (GDP) accelerated to 3.2% in the second quarter from 2.7% in the first quarter, driven mainly by the primary sector, which includes agriculture and mining.

Excluding the primary sector, growth in the rest of the economy slowed from 3.8% in the first quarter to 1.6% in the second quarter.

Inflation forecasts

In its biannual release, the Bank said inflation was expected to remain within the target range of between four and six percent.

“Headline CPI inflation is consequently expected to average 5.6% in 2012, and 5.2% and 5% in 2013 and 2014 respectively,” the report added.

Core inflation, with the exclusion of food, petrol and electricity prices, was forecast to peak at 4.9%.

“The Bank’s forecast of core inflation (excluding food, petrol and electricity prices) has improved slightly. While an upward trend is still expected to prevail in the short term, core inflation appears to be well contained, with a peak of 4.9% expected in the final quarter of 2012, compared to the previous forecast peak of 5.4%. This measure is now expected to average 4.6% in both 2013 and 2014.”

Employment forecasts

The risks to the forecast for inflation were seen by the Bank as “more or less balanced”.

The Bank said that higher petrol as well as anticipated higher food prices was being offset by demand pressure.

The report also noted that employment levels increased up to the middle of 2012.

“But industrial unrest in the mining sector suggests a worsening of prospects for the third and fourth quarters of this year. The impact will be exacerbated if confidence weakens significantly in other sectors of the economy,” it said.

Source: SANews.gov.za