2 minute read
9 Sep 2014
7:04 pm

Economy to improve – Nedbank

The economy is expected to improve in the second half of the year, Nedbank said on Tuesday.

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“The economy is expected to improve in the second half of the year off a low base and also supported by some improvement in global demand,” the bank’s economic unit said in a statement.

“However, growth in domestic demand is likely to remain subdued as households will remain cautious given pressure on disposable income, rising debt service costs and the weak job market.”

This would be while general government strove to reduce the fiscal deficit and growth in the public sector wage bill over the medium term.

In its Quarterly Bulletin released on Tuesday, the SA Reserve Bank (SARB) said the repercussions of the five-month-long platinum strike were still affecting the country’s economy.

Real Gross Domestic Product (GDP) fell 0.6 percent in the first quarter of the year and then rose in the second quarter by an annualised rate of 0.6 percent.

“This barely positive growth rate was extremely disappointing given the country’s development needs, and was mainly brought about by the drawn-out industrial action in the platinum-mining subsector which started on 23 January 2014 and only came to an end five months later.”

South Africa would have been considered to be in a recession had there been two consecutive quarters of negative growth.

The GDP is the total value of goods and services produced in an economy over a certain period.

Nedbank’s economic unit said private firms would still be wary of expanding capacity aggressively, given the weak economic environment and other structural problems.

“The current account deficit should narrow as exports improve following the normalisation of operations in both the mining and manufacturing sectors.”

Overall, domestic demand remained lacklustre.

“We have revised our GDP growth forecast down to 1.5 percent in 2014, but revisions due in December make this more speculative than usual,” it said.

“The Reserve Bank still faces the dilemma of striking a balance between weak growth and heightened inflationary pressures.”

It believed the SARB would raise interest rates by another 0.25 percentage points in November.

However, this would depend on the trajectory of inflation and the movement of the rand during this time.

– Sapa