Oct. 19 (Bloomberg) -- South Africa should maintain government spending and keep monetary policy loose to avoid an economic slump, said Antoinette Sayeh, director of the International Monetary Fund’s African department.
Sub-Saharan Africa’s biggest economy, like some other emerging nations, is expanding by less than its potential as the debt crisis in Europe weakens export demand and lowers investment, Sayeh said in an interview today in the Kenyan capital, Nairobi.
“South Africa and other middle-income countries are likely to be significantly affected by a euro crisis,” she said. “We’re saying to those countries, that are not growing at the level they could grow and where there are no financing constraints, that they should indeed maintain that same stance of larger fiscal deficits and potentially monetary policy that is more lax, in order to mitigate the impact of that crisis on their economy.”
South Africa’s central bank left its benchmark lending rate at a 30-year-low of 5.5 percent on Sept. 22 and said the Monetary Policy Committee was “ready to act” if the economic crisis in the U.S. and Europe threatens to derail growth.
South Africa’s economy is expected to expand 3.4 percent this year and 3.6 percent in 2012, compared with a sub-Saharan average of 5.25 percent and 5.75 percent, respectively, the IMF forecast in its Regional Economic Outlook published today.
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