South Africa’s financial markets have not been shielded from a global market crisis but will weather the storm, thanks to a strong regulatory framework, Treasury Director General Lesetja Kganyago said on Wednesday.
Kganyago also said at the Reuters Economist of the Year event that the economy might have taken a knock since the beginning of this year but is ”nowhere close to a recession”.
South Africa’s financial markets have been buffeted by waves of risk aversion during the year-old global credit crisis that has spread from the United States financial sector. The country’s big current-account deficit makes it heavily dependent on foreign investment.
”We are not an island. We will be affected through a number of channels but will not see anything that will require policymakers’ intervention,” he said.
”The road ahead [for global financial markets] continues to look bumpy. South Africa has not been immune to these developments. We have not been shielded but because of the robustness of the regulatory reforms … we will weather the storm,” Kganyago added.
Kganyago also said the slowdown in consumer demand, which has fuelled economic growth in the past four years but also been inflationary, was a necessary adjustment.
Analysts say domestic demand has cooled in the wake of 500 basis points worth of interest-rate increases since June 2006 as the central bank grapples with spiralling inflation.
The South African Reserve Bank left its key repo rate unchanged at 12% in August, partly heeding calls that monetary tightening was starting to strangle economic growth.
Economic growth has averaged 5,1 % over the past four years, but is seen slowing to 4.% in 2008, the National Treasury has said. — Reuters