MARIAM ISA, Pretoria | Tuesday
GROWTH in the South African economy accelerated in the second quarter of 2000 after a sharp slowdown in the first, but the pickup was not enough to trigger fears of a quick interest rate rise.
Gross domestic product grew by a seasonally adjusted and annualised 1.6% in the second quarter compared with the first, but the first quarter increase was revised down to 0.8 percent from a previous estimate of 0.9%.
Statistics South Africa said that gross domestic product (GDP) increased by an unadjusted 2.4% in the second quarter, compared with the same quarter a year ago.
Economists said the increase, which was slightly above expectations, was good news for South African markets, but the jury remained out on the increasingly heated issue of whether the next move in interest rates would be up or down.
”It’s no threat to interest rates. It wouldn’t cause rates to move higher in the medium term,” PSG investment bank economist Noelani King said.
”It’s still indicative of a very sluggish economic environment, but positive that we have seen an uptick in growth from the first quarter. From a sentiment point of view, it should be positive.”
The markets remained largely unaffected by the data, which contrasted with forecasts of more sluggish second quarter growth of 1.3% from a Reuters poll.
Economists are divided on the direction of the next move in commercial lending rates, which have declined steadily from a peak of more than 25% in 1998 to 14.5% since late January.
Some are convinced that the central bank will soon have to raise rates to get its benchmark CPIX inflation measure down to its target of between 6%and 3% by the end of 2002.
Others are adamant that with domestic demand sluggish and steep global oil prices the main reason for higher inflation, interest rates should be cut. The main issue is to boost growth sufficiently to generate badly-needed jobs.
The main reason for the downward revision of the first quarter growth figure was a 4.0% fall in the mining sector, sharper than previously thought, according to Statistics South Africa. – Reuters