(Updates rand exchange rate in final paragraph.)
Oct. 4 (Bloomberg) -- South Africa’s economic growth forecasts are “far too ambitious” as financial market turmoil derails the global recovery, undermining the government’s goal of slashing unemployment, Finance Minister Pravin Gordhan said.
The rout on world markets has “cast a shadow” on South Africa’s economic outlook, Gordhan said in a speech in Johannesburg yesterday.
“Our growth projections at the time of the budget and before the current market turmoil were for the economy to grow 4 percent a year for the next three years,” Gordhan said. “Clearly that is far too ambitious in the current context unless we do something spectacular for ourselves.”
Gordhan’s comments indicate he may trim projections that the economy will expand 3.4 percent this year and 4.1 percent in 2012 when he presents his mid-term budget on Oct. 25. The central bank on Sept. 22 cut its forecast for economic growth this year to 3.2 percent from 3.7 percent, while lowering next year’s estimate to 3.6 percent from 3.9 percent.
The European debt crisis threatens to cause another recession, weakening the recovery in Africa’s biggest economy. Europe buys about a third of the nation’s manufactured goods.
“The weakening growth performance in developed markets and escalation in market volatility has cast a shadow over our own domestic outlook,” Gordhan said. “Business and consumer confidence readings have declined, highlighting growing pessimism regarding the health of our economy.”
South Africa’s economy expanded at an annualized rate of 1.3 percent in the second quarter, the slowest pace in about two years, as manufacturing and mining output plunged. The Reserve Bank kept its benchmark interest rate at a 30-year low of 5.5 percent last month, adding that it would “act appropriately” if it needs to protect the economy from the global crisis.
The government’s plan to boost growth to 7 percent a year in order to create 5 million jobs by 2020 “may not be possible” for now, Gordhan said. The global recovery may take longer than previously thought, he said.
South Africa’s jobless rate of 25.7 percent is the highest of 61 countries tracked by Bloomberg.
The rand depreciated for a fourth day, weakening as much as 0.9 percent to 8.3003 per dollar and trading 0.1 percent down at 8.2349 by 8:33 a.m. in Johannesburg. The currency has lost 19 percent this year, making it the worst performer among more than 20 emerging-market currencies against the dollar, according to data compiled by Bloomberg.
--Editors: Nasreen Seria, Antony Sguazzin
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