South Africa’s financial system is ” fundamentally sound and well capitalised”, according to the International Monetary Fund’s (IMF) Article Report released on Wednesday.
The report states that the South African economy has shown resilience during the global financial instability.
The report projects growth of 3,8% for 2008 and 3,7% for next year.
It states, however, that electricity supply, lower demand in partner countries and elevated debt service burdens in households will be major risks to the economy.
The report highlights that South Africa has not been immune to the inflationary pressures from increases in global food and oil prices.
It further states that inflation has continued to rise but is expected to peak later in 2008, before beginning a downward trajectory.
The IMF projects the current-account deficit at 9% of GDP in 2008, and 9,6% in 2009. This compares with the Treasury’s 2008 budget forecast of 7% to 8% of GDP.
The report states that the rising current-account deficit and inflation pose a challenge if the country hopes to accelerate growth and spur job creation.
The IMF said it supports the country’s ” flexible” exchange-rate system as it provides a buffer against external risks.
The international body said it supports the Treasury’s view that it is counter-productive to influence the level of the real exchange rate through intervention.
Meanwhile, the Financial System Stability Assessment Report (FSAP) has stated that any further liberalisation in the exchange-control system would be challenging in the light of the volatile financial markets, heavy reliance on portfolio inflows and corporate deposits in the banking system.
The FSAP mission met the South African Reserve Bank, the Financial Services Board, JSE, National Credit Regulator, banks and insurance companies. — Sapa