Too early to revise 3.4% growth forecast: BUSA

Friday, August 12, 2011

Pretoria - It would be premature to revise South Africa's 2011 growth forecast of 3.4% due to the current global turmoil, says Business Unity South Africa (BUSA).

"As BUSA's forecast for economic growth as a whole in 2011 of about 3.4% has always been conservative, it believes that any immediate revision of this forecast would be premature," said the organisation on Thursday.

Positive elements in the global outlook include high commodity prices for gold, platinum and coal. South Africa's slow rate of growth in export volumes has lagged far behind that of other emerging economies.

BUSA said if the country hopes to minimise any possible negative impact of the global economic situation, it should concentrate on those factors it has control of, rather than focus on external ones over which it has little influence.

"This means expediting infrastructural spending and related projects to support growth and employment so as to offset any adverse consequences that may arise from the global outlook," it said.

The country is in a good position to maintain its counter cyclical fiscal policies within a sound macro-economic framework.

"While the risk of recession in South Africa remains low, the global situation reinforces the need for domestic policies that are certain and predictable. It is also clear that interest rates may now have to remain low for longer as an essential element of support for the SA economy in this uncertain period, perhaps well into 2012," it noted.

The repo rate currently stands at 5.5%.

"BUSA shares the view expressed previously by Finance Minister Pravin Gordhan and Governor of the Reserve Bank Gill Marcus that despite the current turbulence in global financial markets, South Africa's financial institutions are adequately capitalized," said BUSA.

The organisation added that investors should not make hasty financial decisions and should keep a cool head in a situation which, although one of concern, is not seen on present evidence as a repeat of the 2008 global recession.

This comes as surveys of international investors and financial planners still reveal a positive valuation of the local equity market despite present volatility in global markets.

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