South Africa's Economy Growing Steadily

Rate is better than a few months of this year but it's in line to be the same in last year.

Despite a worse than expected inflation outlook and another interest rate hike on the horizon, South Africa's economy is growing steadily, economists said Aug. 14.

"GDP growth remaining at 5% during 2007, thus unchanged from last year. This is an upward revision to the April and January forecasts which saw 2007 growth at 4.8% and 4.5% respectively," the Bureau for Economic Research said Aug. 14.

South Africa's Reserve Bank's inflation measure, the consumer price index which measures the impact of inflation on the average consumer excluding mortgage costs, was expected to remain above 6% until 2008.

"While external (food and energy) factors were the main drivers of the adverse inflation developments, there are signs that general price pressures are also accelerating, "said the BER. This higher inflation forecast meant another 50 basis points increase in interest rates by the end of the week. "It is certainly possible that a further 50bps hike could follow in October, especially if oil prices remain at current highs and real signs of slower consumer spending are not forthcoming," said the BER.

The bank had raised the repo rate, at which it lends money to commercial banks, five times since June last year, by a total of 2.5 percentage points to 9.5%.

Copyright Agence France-Presse, 2007

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