South Africa's economic outlook remains buoyant

Pretoria - Despite the difficulties experienced by the global economy and right here at home, economists continue to put South Africa's growth rate prospects at 3 percent and more for 2011.

"With inflation and interest rates at historic lows, the prospects for 2011 are positive," said Citadel Chief Investment Strategist, Dave Mohr.

Forecasts have remained fairly consistent across various institutions. In February's budget speech, Finance Minister Pravin Gordhan placed growth prospects at 3.2 percent, and revised figures marginally higher to 3.5 percent in the mid-term budget in October.

The Bureau for Economic Research in February 2010 said it expected the GDP to grow by an estimated 3.5 percent in 2011 and that it would remain below 4 percent up to 2012.

Mohr attributed his estimations to a strong comeback by the world economy in 2010, rebounded commodity prices, sustained appetite for commodities and a return to positive growth by developed nations and emerging markets.

"Another issue supporting our positive outlook is improved household spending," said Mohr.
Household spending is expected to improve by between four and five percent.

He said the US is likely to retain its title as the largest economy but that emerging markets would sustain their growth rates.

Head of Portfolio Modeling at Citadel, Maarten Ackerman, said investors should be wary that higher economic growth in emerging markets is no guarantee for higher returns on investments.

"The investment return will not be determined from the economic growth in emerging market countries, but rather from the price you paid for these investments," said Ackerman.

Today, the Reserve Bank's Monetary Policy Committee (MPC) began its two-day meeting on interest rates.

The repo rate at the MPC's last meeting was cut by 50 basis points to six percent. Mohr said it is likely that the central bank will cut the repo rate by another 50 basis points.

Governor Gill Marcus will announce the MPC's decision tomorrow.

- BuaNews