STEVEN MANN, Cape Town | Wednesday 12.00pm.
THE recent hammering taken by share prices on the Johannesburg Stock Exchange was inevitable, but the country’s economic fundamentals remain sound and the economic outlook is positive, Reserve Bank governor Tito Mboweni said on Wednesday.
“It’s a correction that was bound to happen at some point,” he told Parliament’s finance committee.
Mboweni predicts that the rand will stabilise, stressing that while the dollar is very strong, the rand is not performing badly against other major currencies.
While inflation might come under short-term pressure, in the medium and long term no major inflationary pressures are envisaged, he said.
“In view of the underutilisation of labour resources it seems likely that the growth in nominal unit labour costs will be contained in the next few years. There are no signs of excessive increases of domestic demand in the next three years.”
Mboweni said South Africa should not experience any difficulty in financing its balance of payments current account deficits.
“The total foreign debt of the country at a ratio below 30% of gross domestic product is comparatively low. This should allow some scope for foreign borrowing if the need should arise.”
Mboweni said the Reserve Bank will continue to follow prudent monetary policy.
He warned that instability in Zimbabwe is causing market uncertainty in South Africa, and said the sooner the situation is brought back to normality the better.