Economists upbeat about year ahead
Mantshele wa ga Tau
7 January 2003
Economists say 2003 will be much better for consumers and the country’s economy.
This, they say, will be partly due to the fact that the currency’s strength, which increased by more than 30 percent towards the end of 2002, is likely to be stable in the first quarter of the year.
They also predict a decline in the interest rate and inflow of foreign capital.
In line with expectation, the currency began the New Year on a high note, surpassing the R8.50 level to the US Dollar – the highest level in 16-months. It traded at around R12.50 during this time last year.
Money Market Service International economist Michael Keenan says he believes the currency will sustain its gains for a variety of reasons, including firm gold and platinum prices. Gold traded yesterday at its highest level in six years. South Africa is a big exporter of the two money-spinning precious metals.
‘If things get going early enough, Telkom's listing on
the Johannesburg Stock Exchange will generate around R12- billion for the economy and the ICC Cricket World Cup will positively impact on the critical tourism aspect of the economy,’ says Keenan.
The fact that Toyota South Africa will try to emulate BMW’s export success story this year is also good news for the economy, he added.
Asked to comment on the performance of the world’s best performing currency against the US Dollar in 2002, he replied: ‘It will be between R8.50 and R9.20 for the better part of the first quarter.'
Standard Bank senior economist, Johan Botha, says he expects a fairly stable currency in the medium to short term.
‘Of course this should lead to an inflation decrease and ultimately a drop in the interest rates, especially the money market.’
On the economy, Botha pointed out that although the global economy was uncertain, South Africa was still in a good position to achieve a 3.5 percent growth rate due to fixed
investments, stable exchange rates and capital inflows.
On the food price hike that hit South African consumers last year, owing to the Rand’s sharp depreciation earlier in the year, he said retailers would not further increase prices. ‘However, it is unlikely that there will be price reductions,’ Botha said.
He agreed that the hosting of the ICC Cricket World Cup from 08 February to 23 March would impact positively on the country’s high riding tourism sector.
On the petrol price, which recently experienced two consecutive decreases - in December by 16 cents and on 1 January by 18 cents - he said motorists would be pleased to know it would remain unchanged.
He added that the Department of Minerals and Energy’s equalization fund would assist in case of any rise, saying if it occurred, a rise would only be marginal.
However, both economists have warned that should the US invade the oil-producing Iraq, such a war would impact negatively on the
country’s economy and the international community.
The Rand is currently trading at R8.49 against the US Dollar, R13.69 against the Pound and R8.79 against the Euro.
Source: Bua News
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