Tuesday 4 November 2008

South Africa not immune from global crisis: Central bank

The economy of South Africa, Africa's economic powerhouse, cannot be immune from the effects of the global financial financial market c
risis, the central bank's monetary policy review committee said on Tuesday.

"The volatile and uncertain financial market environment will continue to complicate monetary policy decision-making for some time," the committee said in its bi-annual report.

The bank will, however, continue to focus on medium-term inflation targetting despite the global financial market crisis, it said. "The main risks to the inflation outlook emanate from the possibility of further electricity price increases, which will be announced next week," said the report.

Petrol, food price increases and the volatile exchange rate are some of the factors contributing to the inflation uncertainty. Since last year, South Africa's inflation of 12 percent has been hovering above the target range of between 3.0 to 6.0 percent.

The inflation rate for the overall food price component of the CPIX increased from 15.4 percent in March to 19.2 percent in August, before slowing to 17.9 percent in September.

"Although South African markets have been fairly resilient to the current crisis, the heightened levels of uncertainty about the global economy are contributing to a challenging monetary policy-making environment," the bank said.

The most recent International Monetary Fund (IMF) data show that world growth in real gross domestic product (GDP) was five percent in 2007 and will slow to an estimated 3.9 percent this year against the backdrop of increasing turmoil in global financial markets and stagnating growth in the advanced economies.

The South African economy grew at an annualised rate of 4.9 percent in the second quarter of this year, compared to a much slower rate of 2.1 percent in the first quarter.

Source: EconomicTimes

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