/ 26 February 2009

No MPC meeting for now, says Mboweni

South African Reserve Bank governor Tito Mboweni said on Thursday at an investment function that an emergency Monetary Policy Committee (MPC) meeting had not been called in the wake of the poor growth data.

But he did say that “the MPC can meet at any time” but if this did occur “we have to make sure people are informed about it so they can make informed decisions”.

He also emphasised that the MPC would not call a meeting based on just one piece of data, or historical data.

He said the MPC needed to be forward-looking and look at the overall impact on, for instance, inflation.

This comes on news that South Africa’s quarter-on-quarter seasonally adjusted annualised growth rate had dipped for the first time in a decade to -1,8% in the fourth quarter from 0,2% in the third. It was also the worst performance since the fourth quarter of 1992 when it struck -3,4%.

A snap poll of 10 economists by I-Net Bridge showed seven out of 10 feeling an emergency meeting could be called.

‘My English teacher taught me that when you are uncertain of something you use words like ‘may’ or ‘could’ and when you are certain you use ‘will’ or ‘shall’,” said Mboweni.

‘So when I say there will be some significant data soon and we will evaluate it and if that data is fed into our modelling and the outcome indicates we are in a worse off situation, we ‘may’ convene a meeting of the MPC to consider this — not ‘will’,” he said in reaction to reports that had been circulating about the meeting after a television interview.

‘Tomorrow is Friday and ‘may’ still applies,” he said.

‘In the future please mark the words I use as they are not just thrown out,” he emphasised.

‘It is very difficult to take monetary policy decisions and it carries with it huge responsibilities. We do not easily take decision as they have a real impact on people’s lives,” he said.

‘Fourth-quarter performance should not alarm’
Mboweni said that South Africa’s fourth quarter performance should be ‘of some concern” and be looked at very carefully, but should not ‘alarm”.

He said the government’s infrastructure drive would add a ‘lot of support”. He said if it was not for this there would have been ‘difficulties”.

He said the manufacturing sector’s slowdown should not be surprising as it is a sector that is sensitive to rate moves and also the global slowdown, which hurts exports in some areas.

Mboweni raised some concern over a slowdown in the large tertiary sector of the country’s economy and said this showed that skills development needed particular attention, especially in the hard subjects like engineering.

He said the recent CPI (consumer price index) print of 8,1% indicated ‘a very nice slowdown” but that it was ‘not quite like a waterfall as some people had predicted”.

‘It is a nice trajectory — it shows inflation is coming down and should be expected in the context of global inflation coming down and the output gap widening,” he said.

‘We won’t come out of crisis in two years’
Mboweni added on Thursday that South Africa’s economy is not insulated from the global crisis that, in his opinion, will take three or four more years to resolve.

“I believe we will not be able to come out of this crisis in the next two years. It will probably take us three or four years to clean out the balance sheets of some of these institutions to place them on a better footing and there are a lot of experiments, like nationalisation, taking place,” he said.

“We are going to experience a longer period of the dysfunction of financial markets globally,” he said.

He did mention, though, that South Africa’s banking sector looked “strong” and “healthy” after he had investigated their capital adequacy ratios.

However, he did point to “a slight problem” in impaired advances, which are showing significant growth at R87,3-billion.

“It indicates a lot of stress among households or businesses that policymakers have to be careful about.” — I-Net Bridge