SA economy set to surge

Jan 2000 News

The South African economy is already showing signs of recovery, and real growth of 3,3% is forecast for 2000, according to the Bureau for Economic Research (BER).

Speaking at a briefing of exhibitors at the TML Reed-organised Electrex, Instrumentation & Control 2000 trade show, BER senior economist Dr Charles Martin said that the business confidence index started a sustained rise in the third quarter of 1999. This, together with a number of other positive indications, pointed to a period of growth in our economy.

He believed that the gross domestic product (GDP) would grow by more than 3% for at least the next two years. While he felt that the headline consumer price index (CPI) was likely to drop to 5% in 2000, the producer price index (PPI) was likely to climb to 6,7% which meant that core inflation would remain relatively high.

Interest rates were unlikely to fall much below current levels, with the prime overdraft rate expected to remain around 15%.

Among the global factors that were likely to impact locally were predictions of improved growth among our major trading partners; the stabilisation or rise of their interest rates; the strengthening of commodity prices; and subdued inflation. Of significance to our export markets, were forecasts of 5% and 4% growth in the economies of emerging Asia and Latin America respectively.

While the overall economic outlook was positive, Dr Martin warned that there were a number of critical issues that could influence developments: these included changes in the government's broad economic policy; the flow of direct foreign investment into and out of South Africa; the impact of Y2K; and AIDS.

He felt that the government's 'strong election victory' meant that it would probably maintain strict control in its economic policies. "Electoral support means that it will probably feel it has a mandate to take unpopular, but economically sound, decisions."

Dr Martin said that AIDS statistics indicated that there would be a 2-2,5% annual decrease in the South African population by 2004. Its impact on the economy would include:

p A substantial drop in savings.

p Pressure to increase state expenditure.

p A shift in the PCE.

p A reduction in labour productivity.

p A drop in the supply of labour.

p A concomitant rise in wages.

Electrex 2000, South Africa's international motion control and instrumentation exhibition, will take place at Gallagher Estate in Midrand from 15-17 March. Stand bookings may be made through and complementary tickets obtained from Sue Philipson at TML Reed's Johannesburg office.

TML Reed

(011) 886 3734

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