PAUL RICHARDSON, Johannesburg | Thursday 4.00pm.
SOUTH Africa will post higher growth this year as interest rates fall with inflation, the rand declines more gently than last year and the country’s balance of payments improves, according to a survey of economists.
A quarterly poll of 23 analysts showed the economy, which grew by just 0,1% last year, is expected to register a growth rate of 0,7% this year, followed by 2,8% and 3,0% growth respectively in 2000 and 2001.
Economists expect the turnaround later this year to be led by a continuing decline in interest rates. Prime rate, which currently stands at 19%, is forecast to fall a further three percentage points to 16% by the end of the year.
The drop in rates is expected to fuel consumer demand, recently crippled by soe of the highest real interest rates in SA history. The South African Chamber of Business (Sacob) agreed, and a marginal 0,7 rise in its Business Confidence Index to 85,2 in April reflected some optimism. Sacob noted that local firms are in a “wait and see” mood prior to elections, but director general Raymond Parsons said “sentiment does seem to be moving out of negative territory at last.”
The improvement in growth will spell the end of the current recession that began in the third quarter of last year, when the central bank hoisted interest rates to defend the rand, although the contraction will extend into the first quarter of this year, the economists agree.
“There is just not much evidence that there was any growth in the first quarter of this year,” said Nedcor chief economist Dennis Dykes.
Lehman Brothers economist Michael Hume said that inflows into the bond market, heaped on top of more privatisation receipts and the benefits of South African companies who have listed in London repatriating profits, will help the rand maintain a steady course this year.
Although economists said they expect the rand to depreciate mainly in line with inflation differentials with the country’s major trading partners, ending the year at R6,42 to the dollar from R5,88 at the start.
The econmists polled noted that their forecasts are based on expectations that the upcoming June 2 general election will be uneventful an confirm ANC domination of national politics.