S. Africa's Economy to Grow 3.25%

But job creation is main challenge with current rate at 24.5%

Compared to the 2.8% forecast by the country's reserve bank, South Africa's economy is likely to grow around 3.25% this year, the IMF said on Sept. 21.

The group predicted medium term growth reaching 4.5% by around 2014.

"The recovery most recently has been led by a rebound in activity in the export-oriented and interest sensitive sectors: mining, manufacturing, and financial services."

Despite the forecast for economic growth this year the report said job creation still remained the country's main challenge. South Africa's official unemployment rate is at 24.5% of the workforce.

"The overriding economic policy challenge is reducing unemployment and inequality through higher economic growth. On the macro economic front, this requires fiscal and monetary policies that will sustain the ongoing recovery while gradually shifting to a more neutral stance so that economic recovery takes hold.

"Second, because the likely growth path under current policies is only going to have a limited impact on unemployment, there is a need for reforms to improve the efficiency of labor and product markets," said the IMF in a statement.

South Africa's economy fell into recession in the last quarter of 2008 but it lasted only nine months and was relatively mild compared to the economic downturn experienced in wealthier countries.

The recession was the first in 17 years, ending a period of prolonged growth since the end of white-minority apartheid rule in 1994.

Copyright Agence France-Presse, 2010

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