South Africa's target of lifting economic growth to an average of 6 percent between 2010 and 2014 appears "implausible" due to the global economic downturn, the government said on Thursday. It will also struggle to meet its aim of halving unemployment. It added, however, that the government would not yet lower the targets due to the uncertainty surrounding the global recession.
An economic plan formed in 2006, known as the Accelerated and Shared Growth Initiative for South Africa, set out plans to boost growth and cut poverty in Africa's biggest economy. But the latest annual report of the programme warns the global economic recession, which it says may continue for longer than previously expected, made its goals difficult. "The result is that the original AsgiSA target of growing at an average rate of 6 percent between 2010 and 2014 now may appear implausible," the report said.
"In turn, the target of reducing unemployment by half to 14 percent or less in 2010 may appear to be endangered, and possibly also the target of halving poverty between 2004 and 2014." South Africa's economy expanded by an average 5 percent in the four years to 2007, but growth slowed to 3.1 percent last year, knocked by electricity shortages and slowing world growth.
It contracted by 1.8 percent in the fourth quarter of 2008, the first decline in a decade, and looks to have fallen into the first recession in 17 years following a series of weak data in the first quarter of 2009. The manufacturing sector has been particularly hard hit, with output declining by a record 15.0 percent year-on-year in February, while mining production and retail sales are in decline, putting thousands of jobs at risk.
ACHILLES HEEL The report said growth should be about 1 percent this year, in line with the Treasury's latest forecast. "Now the targets look more difficult. Because of the unpredictability of the economic future at this time, the targets to 2014 have not been revised."
Alan Hirsch, deputy head of policy in the office of the President, said the economy had proved resilient in past years and may recover quicker than others, while it was also unclear how deep and how long the global crisis would be. "There is nothing that tells us it is impossible at this stage," he told reporters.
The official jobless rate has fallen sharply over the past five years but at 21.9 percent remains well above the 2014 target of 14 percent. The report said the AsgiSA programme supported keeping a policy of a floating exchange rate and that fiscal and monetary policy authorities should look for opportunities to reduce the volatility of the rand currency.