Confidence in South Africa’s economy fell slightly in November as analysts trimmed their growth forecasts, a Reuters poll showed on Thursday.
Africa’s biggest economy grew by a lower-than-expected 2,6% in the third quarter, compared with a downwardly revised 2,8% in the second quarter, in part due to strikes for higher wages.
The Reuters Econometer survey, an index of six weighted indicators, fell to 270,21 in November compared with 272,80 in October.
Twenty economists polled expected gross domestic product (GDP) growth of 2.8% this year, down from 2,92% in the previous poll. GDP was seen up by 3,4% and 3,78% for 2011 and 2012 respectively.
“The 2010 growth is lower than we had originally expected at the start of the year, in part because of the negative impact of the industrial action which hit the economy in the second and third quarter,” said Carmen Nel, economist at RMB.
About 1,3-million state workers went on strike for nearly a month in August demanding higher pay. The government’s higher-than-inflation wage settlement set a tone for other sectors that suffered similar industrial action.
Strong rand
Also weighing on the economy was a strong rand, which has gained more than 26% against the dollar since the beginning of 2009, hurting manufacturing and mining exports.
The consensus was for the rand to end the year at 7,05 against the dollar, weakening to 7,47 and 8,01 in 2011 and 2012 respectively.
“The overall level of the rand … is a drag on the recovery, definitely,” said Peter Attard-Montalto of Nomura International.
The strong rand has helped to contain inflation pressures though. Consumer inflation ticked up slightly to 3,4% in October, still very close to the bottom end of the central bank’s 3% to 6% target band.
The Econometer poll was for CPI to average 4,31% this year, rising to 4,49% next year and 5,42% in 2012. Economists revised their CPI forecasts for 2011 and 2012 down.
Given the benign inflation outlook, interest rates were seen remaining lower for longer. The central bank cut the repo rate by 50 basis points in November to 5,5 percent, adding to 600 basis points worth of reductions since December 2008.
The mean consensus was for a repo rate of 5,5% by end-2010, rising to 6,03% by the end of next year and 7,43% the end-2012. All consensus forecasts were below those given in October’s poll. — Reuters