Government’s view is that the odds are 60-40 against the global economy falling back into a so-called double dip recession, Finance Minister Pravin Gordhan said on Thursday.
The government was carefully monitoring the latest global financial crisis, he told reporters in Pretoria, following Cabinet’s fortnightly meeting the day before.
“I think our own view at the moment is it’s 60-40 against the double dip. There are other people who say it’s now 50-50 … but let’s wait and see, and we’ll keep South Africa informed about what we need to do.”
Earlier, in a statement, the Cabinet urged South Africans and businesses to “exercise caution and responsibility” in the management of finances, in view of current world economic events.
“Cabinet would like to reassure South Africans on our financial austerity measures, especially in light of the plunge by global markets in the recent week,” spokesperson Jimmy Manyi said at the briefing.
Even before the 2008 financial crisis, South Africa had taken the necessary measures to ensure the soundness and stability of its financial system and fiscal accounts.
This had enabled the country to weather the crisis when it hit. As a result, South Africa was one of the first countries in the world to register positive growth after the recession.
Economic growth accelerated to over three percent and the growth forecast for this year was 3.4%, he said.
“South Africa is monitoring the current global situation together with other G20 countries and stands ready to take action should the need arise.”
While acknowledging that recent developments posed risks to global and domestic growth, it was too early to predict the effect of current events on confidence and growth.
The National Treasury would publish growth forecasts in October, when it released the medium-term budget policy statement, Manyi said.
Gordhan said the government had adopted a “growth-friendly, fiscal consolidation approach” to the world financial crisis, and had not imposed austerity measures or service cuts.
But he conceded the crisis had had a “major impact” on jobs in South Africa.
“[Also] on the manufacturing sector. Our real economy has taken a battering in many ways.”
There was a need to encourage higher levels of investment in South Africa.
Gordhan said he was working closely with both Treasury and the South African Reserve Bank “to ensure that everything we have to do on a co-ordinated basis [to tackle the crisis] we do carefully and properly”.
Responding to a question on the chances of a double dip recession, he said the world’s politicians and political systems needed to inspire confidence in the world economy.
“At the end of the day, politicians and political systems need to create confidence… especially in the United States, and the Eurozone as well, to ensure you don’t spread this crisis wider and deeper,” he said. — Sapa