South Africa's economy was not entering a recession and growth remained strong, central bank Deputy Governor Xolile Guma said on Thursday. "Any notion that the South African economy is soon to enter a recession must be rejected, firmly," he said in a speech posted on the Reserve Bank's Web site.
"The current growth rate of the economy may be somewhat lower than had come to be expected but is still strongly positive and will remain so." Africa's biggest economy grew by 4.9 percent in the second quarter of 2008, rebounding from the first period's 6-1/2 year low of 2.1 percent, after an electricity crisis that knocked mining and manufacturing, eased.
Growth for the year, however, is not expected to meet the yearly average of 5 percent of the past four years, possibly slowing to around 3.5 percent. Some economists, and Moody's rating agency, had warned that the economy may be heading towards recession in late 2008 or early 2009 as soaring inflation and higher interest rates eat into consumer spending.
The central bank raised its repo rate by 5 percentage points between June 2006 and June 2008 to try to tame targeted inflation that soared to a record 13 percent year-on-year in July. However, it left the repo unchanged last month on a better inflation outlook for 2009 and on signs households are beginning to strain under the weight of the previous rate adjustments.
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