S.African Economy To Contract 2.1% In 2009: IMF

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The International Monetary Fund in a report Thursday said South Africa, after facing a buoyant economy in mid-2000s, and growth averaging 5% between 2004 and 2007, is expected to contract 2.1% this year. However, the economy is expected to grow 1.9% next year.

The Executive Board noted that the country had weathered the economic crisis well by following sound macro economic policies, including transparent policy frameworks, a floating exchange rate system and a well supervised financial system.

The short-term outlook for the country is to see a slow recovery in output in the latter part of 2009, and growth next year being well below potential, the IMF said. Downside risks to the outlook remain, and the economy will be vulnerable to changes in investor sentiment, in light of the projected current account deficit, it pointed out. Moreover, South Africa continues to face high unemployment and income inequality.

Inflation is to continue to slow due to weak economic activity, but will start rising again by the end of 2009, driven by rising international energy prices and an increase in regulated electricity prices, among other factors, the lender noted. Further, the current account deficit is expected to widen over the medium term after temporarily narrowing, reflecting a recovery in private demand and an increase in public investments.

(Market News Provided by RTTNews)