South Africa?s 4.7% 3Q Economic Growth Raises Questions About the ...
Posted by ~Ray @ 2008-09-28 02:24:29
The economy’s third quarter performance was a marked improvement over the revised 4.4% advance in the second quarter and was well ahead of the consensus prediction for 4.1% growth according to a survey of 19 economists polled by
Even so the results seemed to prompt more questions than answers some observers say.
"It’s very positive to see growth remaining so robust," Russel Lamberti an economist at Econometrix Treasury Management in Johannesburg. "But I’m not happy with the manufacturing sector. We are not creating the kind of growth we want to see in this economy."
Lamberti isn’t the only one upset by the statistics. On the surface an advance of 4.7% in gross domestic product (GDP) is pretty good for small economy that’s struggling to assert itself. But in addition to manufacturing other industries - agriculture retail hotel and restaurants and transportation and communication - saw their third-quarter growth rates slow.
figures show that the country’s 10.5% interest rate [raised six times in the past 14 months] is citing declining vehicle sales fewer residential building plans and the narrow measure of money supply in September. Meanwhile the South African rand has appreciated almost 12% on the dollar weakening its revenues from exports.
"There is accumulating evidence of things looking weaker in the economy," Dennis Dykes chief economist at South Africa’s Nedbank Group Ltd. () told
South Africa is the host of the and the government has increased spending on railways power production and distribution and stadium venues to prepare for the competitive event. All totaled the government is spending $68.8 billion on infrastructure over the next three years which it hopes to will make up for the slowdowns in other areas of the economy.
However if growth continues to wane. South Africa will be left with underutilized stadiums railways and hotels built specifically for the World Cup.
Should that come about it would end up as the ultimate economic irony: A long-term investment solves short-term woes but end up as that weigh the economy down in the desire run.
However if you like the long-term prospects for South Africa the iShares MSCI South Africa Index Fund () has been a solid performer.
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