Country Report South Africa April 2009

Outlook for 2009-10

• South Africa's next general electionto be held on April 22ndis almost certain to return another African National Congress (ANC) government.
• The decision by prosecutors to drop corruption charges against the ANC leader, Jacob Zuma, means that his likely presidency will not be derailed by court action.
• Given quickly declining business and consumer confidence, the government's fiscal stimulus package will have a limited effect and the economy is forecast to contract by 1.8% in 2009, before recovering to 3.1% in 2010.
• The rand will remain volatile and the Economist Intelligence Unit expects the currency to depreciate to R10.5:US$1 in 2009 and R11.6:US$1 in 2010.
• Inflation is forecast to subside to 6% in 2009 and 5.4% in 2010, helped by the introduction of a new, re-weighted price index and weaker commodity prices.
• After a slight increase in 2008 to an estimated 7.4% of GDP, the current-account deficit is forecast to narrow to 5.5% of GDP in 2009 and to 5.2% of GDP in 2010.

Monthly review

• The National Prosecuting Authority (NPA) has dropped corruption charges against Mr Zuma, citing high-level political interference in the prosecution, thereby bringing the long-running saga to an end.
• The SARB cut the benchmark interest rate by 100 basis points to 9.5% at the end of March. The monetary policy committee will now meet on a monthly basis, instead of a two-monthly basis, to give the authorities more flexibility.
• The SARB remains cautious about inflation, which climbed to 8.6% year on year in February, from 8.1% in January, against a 6% target ceiling.
• The lands minister has taken back a farm that had been redistributed to black leaseholders, on the basis that the land was not being used.
• The latest figures show that household demand contracted by 2.7% in the fourth quarter of 2008 compared with the previous quarter. Gross fixed capital formation rose by a modest 3% as private investment slowed.
• Recent data indicate that manufacturing and mining both declined by 11% year on year in January and car sales were 34% lower in the first quarter of 2009.
• The current-account deficit subsided to 5.7% of GDP in the fourth quarter of 2008 as imports fell faster than exports and the invisible trade gap narrowed.

Source: Country Report