Manuel puts brave face as Africa's largest economy goes sick
CAPE TOWN (Reuters) – Finance Minister Trevor Manuel reiterated on Thursday that South Africa's economy was not in recession, a day after predicting the lowest rate of growth for 2009 in more than a decade.
Africa’s biggest economy is under strain, stung by a global downturn and depressed household demand, weighed down partly by high interest rates.
Retail sales are falling and new vehicles sales are plunging, while manufacturing, the economy’s second biggest sector, suffered its biggest contraction in 10 years in December.
"We’re waiting for the fourth quarter numbers to come and then we have to see what the first quarter looks like, but on past performance we are not in recession," Manuel said on Thursday at a post-budget breakfast meeting.
"Although it sometimes feels in people’s minds that the economy is in recession … as of now we are looking at positive growth."
Manuel said on Wednesday growth was estimated at 3.1 percent in 2008, slowing to 1.2 percent this year before recovering somewhat as the global economy improves and lower interest rates revitalise consumers.
The 2009 forecast growth would be the lowest rate since 1998, following several years of 5 percent expansion.
Data earlier this week showed manufacturing output fell 7.0 percent in December from a 6.4 percent decline the previous month, raising concern the economy may have contracted in the fourth quarter.
Growth was just 0.2 percent in the third quarter, a decade low.
Some economists say the economy will fall into recession — two quarters of negative growth — in the first half of 2009.
Statistics South Africa releases Q4 economic data on February 24 and central bank Governor Tito Mboweni has already said its monetary policy committee may hold a special meeting on interest rates if the data disappoints.
The MPC cut its repo rate by 100 basis points to 10.5 percent last week, adding to December’s 50 basis point drop, on slowing inflation and signs the economy is struggling.
Manuel, the world’s longest-serving finance minister who presented his 13th budget this week, later told SAFM radio he still enjoyed and was challenged by his job.
"I still enjoy it and I can’t think of anything that would challenge me as much," he said in reply to a question on whether he will stay on in the post after elections this year.
"This was the 13th budget I have delivered … this budget has been very different, it feels like the first one."
Manuel is widely respected by the market, and his remaining in the position may soothe investor fears of a major shift in policy under a more left-leaning ruling African National Congress.
South Africans go to the polls in April this year, with the ANC likely to secure another big electoral win..