Recovery fragile, says Marcus

2010-07-07 10:06

South Africa’s economy is recovering but the recovery is “fragile and hesitant“, SA Reserve Bank (SARB) governor Gill Marcus said today.

She said: “Our recovery is substantially dependent on the global recovery and on Europe in particular as a third of our manufactured exports go there.

A slowdown in Europe is not inconsequential for our economy.”

The governor said the global economy was at a crossroads: “The world is in the midst of significant change and the events in Europe are the most vivid examples of how complex and difficult the current environment is.”

While some analysts now saw a double dip as a likely scenario, even the more optimistic who had retained a positive outlook now had a downside risk built into their forecasts.

Marcus said: “The reality is that we probably never really emerged from the crisis, which is now entering its next phase.”

While the inflation outlook for South Africa was presently favourable, the SARB expected inflation to rise in the fourth quarter of 2010.

However, the outlook had enabled the SARB to reduce the repo rate to its lowest level in nominal terms at 6.5% since the late 1970s, Marcus said.

The governor said that average growth for South Africa for 2010 was seen at 3%. 

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