South Africa will probably miss this year’s economic growth target of 2.7%, with a five-month mining strike hurting everything from government revenue to exports, Finance Minister Nhlanhla Nene said.
The economic outlook “has moderated,” Nene told reporters on Tuesday in the capital, Pretoria. Recent forecasts by the International Monetary Fund and others show “the economy is not going to grow as fast as we had anticipated,” he said.
Gross domestic product contracted an annualised 0.6% in the first three months of the year as mining output dropped 25%, the most in almost half a century. The economy is at risk of shrinking again as about 220 000 metalworkers began an indefinite strike over pay on Tuesday.
The mining strike that ended last week “had a significant impact on the economy”, Nene said. “It’s going to take a bit of time for the economy to return to its pre-strike performance.”
Standard & Poor’s cut South Africa’s credit rating to one level above junk on June 13, citing concerns that the government’s finances may be harmed as growth slows. Fitch Ratings reduced its outlook on the nation’s creditworthiness to negative from stable on the same day.
The government has pledged to narrow the budget deficit to 2.8% of GDP in three years’ time from 4% in the fiscal year that ended in March. President Jacob Zuma pledged in his state-of-the-nation speech last month to grow the economy at 5% by 2019.
In a separate speech, Nene said the current-account deficit has remained “stubbornly high” even as the rand weakened and the economy contracted. The gap on the current account, the broadest measure of trade in goods and services, narrowed to 4.5% of gross domestic product in the first quarter, the central bank said on June 18.
The rand fell 0.1% against the dollar to 10.6465 against the dollar today, taking its decline this year to 1.5%.
Economic policy in Africa’s second-largest economy is focused on implementing a 20-year National Development Plan that seeks to cut the jobless rate to 14% by 2020 from 25%.
“It is driven at the highest level and it is given priority in our planning,” Nene said. “I would have no reason to doubt the commitment and the resolve of government to implement the NDP.” – Bloomberg