The South African economy is in what looks set to become a prolonged period of slow growth‚ or stagnation‚ according to payments services company BankservAfrica’s Economic Transaction Index (BETI)‚ released on Tuesday.
Mike Schussler‚ chief economist at economists.co.za‚ who assisted in the compilation of the index‚ expected economic growth in the second quarter of this year to be around 1.2%.
Consensus forecasts were for SA to grow 2.7% in 2012.
Despite SA’s close trade links with Europe‚ Schussler believed the country would avoid most of the turmoil of the European recession.
“We have less of a debt burden‚ both from the government and the household side. Our companies have a lot of cash in the bank that will help to keep us afloat‚” he said.
“The main problem is that Europe needs less of our gold‚ coal‚ iron ore and platinum as new demand declines. The prices of these commodities have decreased by a combined 20% over the last year‚ reducing earnings of the economy.”
Current lower oil prices were providing much needed relief for consumers‚ according to Schussler. Consumption by households in SA accounts for a large portion of overall economic growth.
Schussler suggested that petrol prices‚ taken over the last two months‚ were saving the average SA motorist about R200 per month.
“The lower price of petrol has the same effect as a 1.5% decline in interest rates on a R100‚000 outstanding bond. That‚ and the lower food price increases over the last two months‚ means that consumers are likely to keep spending‚ but the retail and wholesale growth rate may slow down‚” he said.
While lower interest rates are expected to be announced in the next few months‚ the effect will only be felt by the end of the year or early 2013‚ Schussler concluded.