SA exiting recession ‘reasonably rapidly’

South Africa is coming out of its first recession in almost two decades reasonably quickly, South African Reserve Bank Governor Gill Marcus said on Tuesday, as data showed the economy growing late last year.

Official figures showed South Africa’s GDP expanded by 3,2% in the fourth quarter of 2009 on a seasonally adjusted and annualised basis.

“Various short-term indicators also show South Africa coming out of the recession reasonably rapidly,” central bank chief Marcus told a parliamentary committee.

Africa’s biggest economy exited its first recession in 17 years in the third quarter of 2009 and Reserve Bank chief economist Monde Mnyande told the committee indications were the economy continued to improve in the first quarter of the year.

“This onset of recovery should confirm the Reserve Bank’s and National Treasury’s growth forecast for the year at about 2% to 2,3%,” Mnyande added.

Marcus said monetary policy remains directed towards containing inflation. The central bank has cut rates by 500 basis points since December 2008, and left the repo rate flat at 7% at its last four meetings.

“It’s very clear that, when you have an explicit inflation target or a mandate that is explicit, the role of the central bank is to cut inflation, and what this is doing is saying to you, ‘We don’t expect you to act in an extreme manner but you act in the best interests of the economy’,” Marcus said.

She also said it was not the job of the Reserve Bank to create jobs.

Finance Minister Pravin Gordhan said last week he had written to the Reserve bank stressing the need for it to be flexible in its approach.

The Congress of South African Trade Unions and the South African Communist Party are calling for inflation-targeting to be scrapped, arguing that efforts to contain inflation kept interest rates too high, which added to job losses during the recession. — Reuters

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