Marcus: Inflation, low growth cloud emerging markets

Rising inflation and the slowing pace of economic growth in emerging markets will cloud the outlook of these countries for years to come, the Business Report on Thursday quoted South African Reserve Bank Governor Gill Marcus as saying.

In the article that focused mainly on leadership, Marcus said the global economy was in the middle of a “synchronised downturn”, especially in developed nations.

“Though growth in emerging markets remains positive, they cannot be the counterweight to the synchronised downturn on their own,” she said.

“Emerging markets are experiencing a rise in inflation and slowing of growth. I think that we have a very difficult outlook for a long time to come, even for years.”

South Africa’s inflation has been edging up, mainly due to food costs and administered prices that include fuel costs.

Annual headline inflation stood at 5.3% in August, almost a year after it hit a five-year low of 3.2% in September 2010.

Inflation has been inside the Reserve Bank’s target of 3% to 6% since February 2010 and is expected to briefly pierce the target towards the end of 2011, peaking at 6.3% in the first quarter of 2012.

The Reserve Bank has left the repo rate at 5.5% this year after reducing it by 650 basis points in the two years to the end of 2010.

Analysts expect the bank to leave rates at current levels until mid-2012, with a small chance of another rate cut early next year.—Reuters

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